Amber operates her business as a sole proprietorship during 2010.Her domestic production activities deduction (DPAD)before any effect of the wage expense limitation is $70,000.The total W-2 wages that her sole proprietorship pays for the tax year are $110,000.The wages paid to employees not engaged in qualified domestic production activities are $20,000.Amber's DPAD for 2010 is:

Question

Quizplus · Accepted Answer

The DPAD is reduced by the ratio of nonqualified wages to total wages. In this case, the ratio is 20,000/110,000 = 0.1818. Therefore, the DPAD is reduced by 0.1818 * 70,000 = $12,726. The DPAD for 2010 is $70,000 - $12,726 = $57,274.

Amber Operates Her Business as a Sole Proprietorship During 2010