Hippo,Inc. ,a calendar year C corporation,manufactures golf gloves.For 2010,Hippo had taxable income (before DPAD)of $800,000,qualified domestic production activities income of $950,000,and W-2 wages related to qualified production activities income of $130,000.Hippo's domestic production activities deduction for 2010 is:
A)$0.
B)$65,000.
C)$72,000.
D)$85,500.
E)None of the above.

Question

Quizplus · Accepted Answer

The domestic production activities deduction (DPAD) is calculated as 9% of the lesser of qualified production activities income ($950,000) or taxable income ($800,000), which is $800,000. Therefore, the deduction is 9% of $800,000, which equals $72,000. However, it is limited by 50% of W-2 wages ($130,000), which is $65,000. Hence, the deduction is $65,000.

Hippo,Inc ,A Calendar Year C Corporation,manufactures Golf Gloves