Question

Silver, Inc., has taxable income of $600,000 and qualified production activities income (QPAI) of $400,000 in 2018. Silver's domestic production activities deduction is:

a. $40,000.
b. $24,000.
c. $36,000.
d. $54,000.
e. None of these choices are correct.

Answer 1

The domestic production activities deduction for Silver, Inc. is $36,000.

Step-by-step explanation:

The domestic production activities deduction is calculated based on the qualified production activities income (QPAI). The deduction is equal to 9% of the lesser of QPAI or taxable income. In this case, Silver, Inc. has a QPAI of $400,000 and a taxable income of $600,000. The lesser of the two is $400,000, so the deduction would be 9% of $400,000, which is $36,000.

Therefore, the correct answer is c. $36,000.