Morton Inc.is a Kansas corporation engaged exclusively in domestic manufacturing.This year,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 domestic production activities deduction and taxable income:

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Quizplus · Accepted Answer

The domestic production activities deduction is 9% of the lesser of qualified production activities income or taxable income before the domestic production activities deduction. In this case, since the qualified production income of $500,000 is less than the taxable income before the deduction of $500,000, the deduction is 9% of $500,000, which equals $45,000. Therefore, the taxable income will be $455,000 ($500,000 - $45,000).