Which of the Following Statements Regarding the Domestic Production Activities

question 19

Multiple Choice

Which of the following statements regarding the domestic production activities deduction is false?

• A)The deduction is equivalent to a reduced tax rate on income from any qualified activity.
• B)The amount of the deduction allowed for any tax year cannot exceed 50% of the total compensation paid to the corporation's U.S.workforce.
• C)The deduction equals a percentage of the lesser of the corporation's net income from qualified activities or its taxable income before the deduction.
• D)The deduction is only available for U.S.taxpayers engaged in manufacturing activities.

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Definitions:

Equity Method

A method of accounting for investments in which the investor recognizes income based on the proportionate share of the investee’s profit or loss.

Investment Account

An account held at a financial institution or brokerage that is used to hold securities, stocks, bonds, mutual funds, and other investments.

Proportionate Share

This refers to an investor's or shareholder's portion of profits, losses, or stock based on their percentage ownership in the company.