New (tax) year, new help!

Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.

Question

Where do I enter domestic production activities deduction information for Schedule K-1, box 13, code W?

Answer

The domestic production activities deduction (DPAD) has been repealed for tax years beginning in 2018. However, a partnership may still enter applicable 2017 fiscal Schedule K-1 DPAD information on Screen K1-3.

Per the Form 8903 instructions, the domestic production activities deduction (DPAD) is determined at the partner level; therefore, the partnership calculates and reports on Schedule K-1 the information each partner needs to complete his separate Form 8903. The partnership does not file Form 8903.

If the partnership is an eligible entity as defined in Revenue Procedure 2007-34, section 3.01, the partnership may choose to calculate the qualified production activities income (QPAI) and W-2 wages at the entity level. This information will be reported on Schedule K-1, box 13, code W. An eligible partnership can calculate the QPAI and W-2 wages using the section 861 method, the simplified deduction method, or the small business simplified overall method, where applicable.

In Screen K-3, select 1 in the Method for computing qualified production activities income field and enter amounts reported from pass-through entities in Screen K1-3 in the Domestic production gross receipts (DPGR); Cost of goods sold allocable to DPGR; Deductions, expenses, and losses: Directly allocable to DPGR; Deductions, expenses, and losses: Indirectly allocable to DPGR; and Form W-2 wages fields. The QPAI and Employer's Form W-2 wages are calculated on the Domestic Production Activities Deduction Worksheet. The partners' shares of the amounts are reported on Schedule K-1, box 13, code W.

If the partnership does not calculate QPAI and W-2 wages at the entity level, whether by ineligibility per Revenue Procedure 2007-34 or by choice, then the partnership must provide the information for the partner to calculate the deduction at the partner level. Select 2 in the Method for computing qualified production activities income field in Screen K-3. UltraTax CS reports this information on Schedule K-1, box 13, code W. The following information, as listed in the Form 1065 instructions for Schedule K, line 13d, must be provided for the partner to calculate the domestic production activities deduction.

• Domestic production gross receipts (DPGR)
• Gross receipts from all sources
• Cost of goods sold allocable to DPGR
• Cost of goods from all sources
• Total deductions, expenses, and losses directly allocable to DPGR
• Total deductions, expenses, and losses directly allocable to a non-DPGR class of income
• Other deductions, expenses, and losses not directly allocable to DPGR or another class of income
• W-2 wages properly allocable to DPGR
• Any other information a partner needs to use the section 861 method to allocate and apportion cost of goods sold and deductions between DPGR and other receipts

Related topic: Domestic production activities deductions FAQs (1065)

Was this article helpful?

Yes No

Submit