Question

Renee's tentative $2,250 deduction is more than 50% of wages paid in the activity so the DPAD is limited to $1,000. What is the Qualified Production Activity Deduction (DPAD) for Renee?

1) $2,250
2) $1,000
3) $2,500
4) $2,000

Answer 1

Renee's Qualified Production Activity Deduction (DPAD) is limited to $1,000 because it cannot exceed 50% of the wages paid in the qualifying activity.

Step-by-step explanation:

The Qualified Production Activity Deduction (DPAD) for Renee is $1,000. This deduction is subject to limitation which states that the DPAD cannot exceed 50% of the wages paid for the qualifying activity.

Since Renee's tentative deduction of $2,250 exceeds 50% of the wages paid, the actual DPAD that she can claim is limited to $1,000.

The Qualified Production Activity Deduction (DPAD) for Renee is $1,000.

This is because her tentative deduction is higher than 50% of wages paid in the activity, so the DPAD is limited to $1,000. Even though her tentative deduction is $2,250, it is capped at the maximum limit of $1,000.