Section 4.03(1) provides that QPAI
is determined on an "item-by-item basis (and not, for example, on a division-by-division, product line-by-product line, or transaction-by-transaction basis)." The taxpayer's QPAI
is the sum of the QPAI
derived "from each item," which may be either positive or negative.
Section 4.03 provides rules for determining a taxpayer's QPAI
, noting that QPAI
is determined on an item-by-item basis (and not, for example, on a division-by-division, product-line-by-product-line, or transaction-by-transaction basis).
199 income to exclude it from QPAI
, taxpayers may allocate 10% to Sec.
consists of DPGR for a tax year minus COGS and other expenses, losses, or deductions allocable or properly attributable to those receipts.
As noted above, the IRS has issued three items of guidance that discuss how a taxpayer should allocate prior-period costs when determining current-year QPAI
. The IRS guidance items all relate to prior-period expenses; however, two relate to costs that were not part of COGS and one to costs that were part of COGS.
199 deduction, each member's taxable income or loss, QPAI
, and W-2 wages are aggregated.
Computation of QPAI
, including expense apportionment, must also be performed on an item-by-item basis.
A rule similar to that for print media advertising as QPAI
was added for qualified filmmakers (and TV productions); see Regs.
often determines the amount of the Section 199 deduction, particularly for single-line-of-business taxpayers that do not have a significant amount of non-QPAI-generating activity.
199 refers to this figure as qualified production activities income (QPAI
) and defines it as the taxpayer's domestic production gross receipts (DPGR) less the sum of:
199(a) permits a qualifying taxpayer a deduction for the lesser of 9% of qualified production activities income (QPAI
) for the tax year or taxable income (determined without regard to Sec.
The original version of the deduction was phased in through 2009 and is currently equal to 9% of the lesser of the taxpayer's qualified production activities income (QPAI
) or the taxpayer's taxable income.