In computing the taxable income (or loss)of an S corporation,a domestic production activities deduction (DPAD)is not allowed.

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The DPAD is a deduction that can be claimed by eligible domestic production activities businesses (including S corporations), but it is not allowed when calculating the taxable income or loss of an S corporation. Instead, the DPAD is passed through to the shareholders, who can potentially benefit from the deduction on their personal tax returns.

In Computing the Taxable Income (Or Loss)of an S Corporation,a