40.25 Figuring the Deduction
To figure the domestic production activities deduction, start with domestic production gross receipts. If there are gross receipts from domestic and foreign production, you must make an allocation of gross receipts based on any reasonable method to determine qualified production activities income (QPAI).
Reduce this amount by all of the following (based on your books and records if possible, or on any reasonable method):
- The cost of goods sold that is allocable to domestic gross receipts
- Other deductions, expenses, and losses that are directly allocable to domestic gross receipts
- An appropriate share of other deductions, expenses and losses that are not directly allocable to domestic gross receipts or another class of income
Limitations.
The deduction for 9% of qualified production activities income cannot exceed adjusted gross income for sole proprietors and owners of partnerships, limited liability companies, or S corporations (a taxable income limitation ...
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