Marsh Harbor Company manufactures fishing gear. Its taxable income in 2014 before the Qualifying Production Activities Deduction QPAD) is $4,000,000 and its qualified production activities income is $3,500,000. Its qualifying W-2 wages paid are $300,000. How much may Marsh Harbour claim as its QPAD deduction in 2014?

Question

Quizplus · Accepted Answer

The QPAD deduction is calculated as 9% of the lesser of the taxable income before the deduction or the qualified production activities income. Here, 9% of $3,500,000 (qualified production activities income) is $315,000, but it is limited by 50% of the W-2 wages paid, which is $150,000. Therefore, the deduction is $150,000.

Marsh Harbor Company Manufactures Fishing Gear