Trahan,Inc. ,an S corporation,has taxable income of $12 million in 2012.Assume there are two shareholders,each in the top individual tax bracket.What is the maximum total DPAD tax savings for the S corporation shareholders?

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The maximum DPAD tax savings for the S corporation shareholders would be $189,000 each ($378,000 total) assuming they have sufficient wages or qualified business income to take advantage of the full deduction. The DPAD deduction is equal to 9% of the lesser of qualified production activities income or taxable income. In this case, qualified production activities income is assumed to be the same as taxable income, which is $12 million. Therefore, the DPAD deduction would be $1.08 million. Each shareholder would receive a 50% allocation of the deduction, resulting in a maximum tax savings of $189,000 each ($378,000 total).