The Cavanaugh Corporation owns the licensing rights to the Mississippi Marauders hockey apparel. For 2016, Cavanaugh has

Question:

The Cavanaugh owns the licensing rights to the Mississippi Marauders hockey apparel. For 2016, Cavanaugh has gross receipts from qualified production activities of $6,000,000. The cost of goods sold related to these receipts is $2,000,000 and the direct costs related to these receipts is $225,000. Cavanaugh estimates that 15% of its $500,000 of indirect costs are attributable to its qualified production activities. Cavanaugh's taxable income before the qualified production activities deduction is $3,200,000.
a. What is Cavanaugh's qualified production activities income?
b. What is Cavanaugh's qualified production activities deduction?
c. Assume that Cavanaugh's W-2 wages allocable to its domestic production gross receipt points (DPGR) are $190,000. How does this impact Cavanaugh's qualified production activities deduction?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...