Question

Randy owns a small sewing company that embroiders logos on uniforms and work clothes. The business qualifies for the domestic production activities deduction. Randy received $190,000 in revenues and incurred $70,000 in expenses. These expenses included $20,000 of qualified wages. Assuming the qualified production activity income is less than her modified AGI for the year, what is the DPAD for this business?

Answer 1

The DPAD, or Domestic Production Activities Deduction, is a tax deduction that allows businesses to reduce their taxable income based on qualified production activities. To calculate the DPAD, you need to determine the qualified production activity income, which is the revenue from qualified activities minus the expenses. The DPAD for Randy's sewing company would be $10,800.

Step-by-step explanation:

The DPAD, or Domestic Production Activities Deduction, is a tax deduction that allows businesses to reduce their taxable income based on qualified production activities. In this case, Randy's sewing company qualifies for the DPAD. To calculate the DPAD, you need to determine the qualified production activity income, which is the revenue from qualified activities minus the expenses. In Randy's case, the qualified production activity income is $190,000 - $70,000 = $120,000.

The DPAD is calculated by multiplying the qualified production activity income by the DPAD percentage. The DPAD percentage is 9% for most businesses. So, the DPAD for Randy's sewing company would be $120,000 * 9% = $10,800.