Jeff Corporation manufactures and sells ceramic dinnerware. The company also sells dinnerware that is purchased from unrelated foreign producers. During the 2014 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 is eligible to claim DPAD (domestic production activities deduction) on its QPAI (qualified production activity income), which is $1.2 million. The DPAD is equal to 9% of the lesser of QPAI or taxable income. Taxable income is not given, but we know that QPAI is the lesser amount. Therefore, DPAD is 9% of $1.2 million, which is $108,000. The profit from imported merchandise is not eligible for DPAD.

Jeff Corporation Manufactures and Sells Ceramic Dinnerware