O'Neal,Inc. ,an S corporation,has taxable income of $14 million in 2010.Assume there are two shareholders,each in the top individual tax bracket.What is the maximum DPAD tax savings for this S corporation?

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Quizplus · Accepted Answer

The DPAD tax savings for O'Neal, Inc. is calculated as 9% of its qualified production activities income, which is the lesser of 9% of taxable income or 50% of W-2 wages paid. In this case, the maximum DPAD tax savings would be 9% of the qualified production activities income, which is $1.5 million (assuming all income is from qualified production activities). This amount is then allocated to the shareholders based on their ownership percentage. Each shareholder would receive $750,000 of DPAD tax savings, subject to their individual tax rate. As both shareholders are in the top individual tax bracket, their tax rate would be 37%, resulting in a maximum DPAD tax savings of $441,000 for the S corporation.