Final answer:
The Domestic Production Activities Deduction for Gold, Inc. is $3,600. It is calculated as 9% of the lesser amount between the Qualified Production Activities Income and the remaining taxable income after applying the NOL carryforward.
Step-by-step explanation:
The Domestic Production Activities Deduction (DPAD) for Gold, Inc. is calculated by taking the lesser of: 9% of the Qualified Production Activities Income (QPAI), 9% of taxable income before DPAD, or 50% of W-2 wages attributable to domestic production. Since the taxable income before any deduction for an NOL carryforward is $70,000 and the QPAI is $60,000, we first calculate 9% of each.
- 9% of QPAI = 0.09 × $60,000 = $5,400
- 9% of taxable income before DPAD = 0.09 × $70,000 = $6,300
Because the DPAD is not given as a greater figure than these calculations and the W-2 wages are not mentioned, we assume DPAD is the lesser of the two figures calculated, which is $5,400. However, since Gold, Inc. has an NOL carryforward, this must be applied first. The taxable income after applying the NOL carryforward is $70,000 - $30,000 = $40,000. Now we calculate 9% of the remaining taxable income.
- 9% of remaining taxable income = 0.09 × $40,000 = $3,600
The final DPAD is then the lesser of $5,400 and $3,600, which is $3,600.