Jeff Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is purchased from unrelated foreign producers. During the 2016 tax year, Jeff had a U.S. profit of $1.2 million (QPAI) and a profit from the imported merchandise of $300,000. What is Jeff's DPAD?

Question

Quizplus · Accepted Answer

Jeff Corporation can claim a DPAD equal to 50% of its QPAI, which is $600,000. However, the DPAD cannot exceed 50% of wages paid by the company in connection with the production activities that give rise to the QPAI. Assuming Jeff Corporation has sufficient wages to meet this limitation, its DPAD would be $300,000 (50% of $600,000).

Jeff Corporation Manufactures and Sells Ceramic Dinnerware