Milroy Company manufactures steering wheels.Its taxable income in 2017 before the Qualifying Production Activities Deduction (QPAD)is $2,000,000 and its qualified production activities income is $2,500,000.Milroy's qualifying W-2 wages paid are $400,000.How much may Milroy take as it QPAD deduction in 2017?

Question

Quizplus · Accepted Answer

The QPAD deduction is calculated as the lesser of 9% of qualified production activities income or 50% of the W-2 wages paid to employees engaged in qualified production activities. In this case, 9% of $2,500,000 is $225,000, but since the W-2 wages paid are only $400,000, Milroy can only take 50% of that amount, which is $200,000. Thus, the QPAD deduction is $180,000, which is the smaller of the two calculated amounts.

Milroy Company Manufactures Steering Wheels