Production Corporation owns 70% of Manufacturing Corporation€™s common stock and Rita Howard owns the remaining 30%. Each corporation operates and sells its product within the United States, and the corporations engaged in no intercompany transactions. Production€™s Chief Financial Officer (CFO) presents you with the following information pertaining to current year operations:

Operating expenses include W-2 wages allocable to U.S. production activities of $75,000 and $35,000 for Production and Manufacturing, respectively. Given this information, the CFO asks you to determine each corporation€™s qualified production activities deduction. The applicable deduction percentage is 9%. At a minimum, you should consult the following resources:
€¢ IRC Sec. 199
€¢ Reg. Sec. 1.199-7

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Production Corporation $500,000 205.000 $30D,000 Manufacturing Corporation Gross profton sales Minus. Operating expenses Qualified producton activibes income Plus: Dividends received from 20%-owned corporations Minus. Dividends-received deduction 100000 (18000) NOL carryover deduction 15000 Taxable income before the US. production activities deduction 304.000