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    deduction for production activities

    IRC Section 199 provides a 9% additional deduction for the so called "domestic production activities" which is the lowest of certain items which usually is US taxable income of certain businesses involved in construction
    engineering, architectural activities in the US that provide engineering or architectural services. My client, a C corp, in 2016 is an architectural firm with gross revenues of $500,000, taxable income (before NOL) of $40,000 all derived in the US,
    but has an NOL carryforward from prior years to 2016 of $300,000.
    Therefore their taxable income in 2016 is a loss of ($260,000) which is the $300,000 NOL - $40,000 income of 2016. The $40,000 income in 2016 does not have the 9% deduction included for the "domestic production activity"
    Question is, because the NOL makes the taxable income after the NOL in 2016 negative ( ie $-260,000) , is the deduction for the 9% "domestic production activity" not allowed because taxable income after the NOL is a loss
    even though there is taxable income before the NOL?

    #2
    Poor Answer

    Ballpark, what does your software do with it, assuming the 9% is legitimate?

    I realize this is a poor answer, and I'm sure someone who reads this can research and give you a more supportive answer.

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      #3
      https://www.irs.gov/pub/irs-pdf/i8903.pdf. See the instructions on page 7, "Adjusted gross or taxable income"

      The DPAD usually cannot be used to create or increase NOL. I believe the same is true when there is a NOL carry forward.

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        #4
        Originally posted by Snaggletooth View Post
        Ballpark, what does your software do with it, assuming the 9% is legitimate?

        I realize this is a poor answer, and I'm sure someone who reads this can research and give you a more supportive answer.
        My tax software has the form to complete the deduction (in the case) but is not interactive, I have to fill in the blanks. This is somewhat of an esoteric topic

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          #5
          Thank you very much for the reply to this topic. Have you ever done this situation or being audited about this matter

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