Morton Inc. is a Kansas corporation engaged exclusively in domestic manufacturing. In 2012, it earned $500,000 of qualified production income, which also equals its taxable income before the domestic manufacturing deduction. It paid compensation of $200,000 to its workforce. Calculate Morton's 2012 domestic production activities deduction and taxable income:

Question

Quizplus · Accepted Answer

The domestic production activities deduction is equal to 9% of Morton's qualified production income ($500,000 x 9% = $45,000). To calculate taxable income, the deduction is subtracted from the taxable income before the deduction ($500,000 - $45,000 = $455,000). Therefore, Choice A is correct.