Domestic Production Activities Deduction

[S T]

DPAD- My first for a S Corp and pass through to Shareholders. Info to be reflected on 1120S Form K-1 to shareholders using the Simplified Deduction Method

I have the amounts for Gross Receipts COG/Deductions to arrive at QPAI, and I have wages, so I believe that I have all of those correct figures.

My questions are:

1. For the 1120S schedule K or the M-1 there is no notation or the DPAD is not reflected, correct?

2. There is no adjustment for the DPAD for the Shareholder's basis, unlike a Sect 179 basis adjustment?

3. Does the S Corp ordinary business income(loss) on line 21 have any impact or limitation on the amounts passed through on the Schedule K-1 to shareholders? Or is it just the QPAI and the W-2Wages, then the actual Shareholder's AGI/taxable income on the form 1040 is the limitation?
Example would be - S Corp Ordinary income $10,000 but the DPAD for the shareholders would equal almost $12,200 (based on completing shareholders form 8903, 6% of QPAI on line 10 carried to line 12.

As you can tell I am a little confused

Thanks for any assistance,

Sandy

[JG EA]

DPAD- My first for a S Corp and pass through to Shareholders. Info to be reflected on 1120S Form K-1 to shareholders using the Simplified Deduction Method

I have the amounts for Gross Receipts COG/Deductions to arrive at QPAI, and I have wages, so I believe that I have all of those correct figures.

My questions are:

1. For the 1120S schedule K or the M-1 there is no notation or the DPAD is not reflected, correct?

2. There is no adjustment for the DPAD for the Shareholder's basis, unlike a Sect 179 basis adjustment?

3. Does the S Corp ordinary business income(loss) on line 21 have any impact or limitation on the amounts passed through on the Schedule K-1 to shareholders? Or is it just the QPAI and the W-2Wages, then the actual Shareholder's AGI/taxable income on the form 1040 is the limitation?
Example would be - S Corp Ordinary income $10,000 but the DPAD for the shareholders would equal almost $12,200 (based on completing shareholders form 8903, 6% of QPAI on line 10 carried to line 12.

As you can tell I am a little confused

Thanks for any assistance,

Sandy

Sandy,
My software puts an * on the K-1 (Box 12 with code Q & R). I have the option to file forms 8903 with the K-1's . The forms, which are split between the shareholders and then added back together in the case of Hus/Wife on their individual return.
It doesn't affect basis as far as I know.
As to line 21. I take all expenses unless there is solid reason to split the production costs from other costs. Remember it is limited anyway to the wages.

[S T]

dpad

Thanks as always JG,

I think I finally figured it out for the S Corp using Small Bus Simplified Overall Method under $5Mil. (I posted Simplified Deduction in OP and that was in error) Yes my software will enter the codes Q and R on the shareholders K-1 and import to the shareholder's form 1040,

just wasn't sure if I was getting the right numbers in at the S Corp level. And found that I had not, so DPAD is a lot less than what I originally posted. I feel much better about that now.

I agree as far as I can tell, from all that I have read, No M-1 adjustment and no shareholder basis adjustment.

A lot of hours and research to understand this for the S Corp or Partnership level and not much of a deduction for the shareholder, but oh well, that is what we do, research, learn and learn some more

Thanks again,


Sandy