Qualified Production Activities Deduction (LO. 4) The Rollins Group produces cor

Question

Qualified Production Activities Deduction (LO. 4) The Rollins Group produces corporate training videos. It operates as a sole proprietorship and is 100% owned by Scott Rollins. For 2017, Rollins has gross receipts from qualified production activities of $1,537.000. The cost of goods sold related to these receipts is $1.228,000 and the direct costs related to these receipts is $99,000, Rollins estimates that 30% of its indirect costs of $54,000 are attributable to its qualified production activities. Scott's adjusted gross income is $203,800. a. Rollins' qualified production activities income is b. Rollins' qualified production activities deduction is This deduction is based on the qualified production activities income or Scott's ollins' W-2 wages allocable to its domestic production gross receipts (DPGR) are $17,000. Scott's qualified production activities daduction domestic production activities deduction is exceed 50 percent of the gross receipts wages paid during the year. Rollins Group's qualified production

Explanation / Answer

a.

b.  

C.

Qualified Production Activities Deduction will be lower of 17442 (calculated in step b above) and 50% of wages i.e. 157000*50%=78500. So final deduction will be 17442.

Gross Receipts 1537000 Cost of Goods Sold 1228000 Direct Cost related to Gross Receipts 99000 Indirect Cost 30% of 54000 16200 Qualified Production Activity Income 193800

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