Instructions For Form 8903 - Domestic Production Activities Deduction

allocation and apportionment

Line 4

Line 14

methods that you use to determine

If you are using the small business

Form W-2 Wages

QPAI to allocate and apportion wage

simplified overall method (discussed

expense for purposes of the safe

Enter your Form W-2 wages that are

on page 5), enter the amount of cost

harbor.

properly allocable to DPGR

of goods sold and other deductions or

(discussed on page 7). Do not include

Wage expense included in cost

losses you ratably apportion to

Form W-2 wages you must report on

of goods sold. After you determine

DPGR.

line 15.

the amount of wages under the wage

expense safe harbor, discussed on

Line 7

Line 15

page 7, you can allocate a portion of

Beneficiaries of estates and trusts,

those wages to cost of goods sold by

Beneficiaries of estates and trusts,

partners, and S corporation

any reasonable method based on the

partners, and S corporation

shareholders report the QPAI

facts and circumstances. For

shareholders report the Form W-2

distributed from estates or trusts, and

example, you can include wage

wages distributed from estates or

certain partnerships or S corporations

expense in cost of goods sold in

trusts, and certain partnerships or S

on line 7. The QPAI should be

proportion to (a) the amount of direct

corporations on line 15. The Form

reported to you on Schedule K-1 for

labor included in cost of goods sold,

W-2 wages should be reported to you

Forms 1041, 1065, or 1120S. See the

or (b) section 263A labor costs (as

on the Schedule K-1 for Forms 1041,

related Schedule K-1 and its

defined in Regulations section

1065, or 1120S. See the related

instructions for more information.

1.263A-1(h) (4)(ii)) included in cost of

Schedule K-1 and its instructions for

goods sold. See Temporary

more information.

Line 9

Regulations section

1.199-2T(e)(2)(ii)(B) for more

Estates and trusts must use

Line 17

information.

Regulations section 1.652(b)-3 to

Estates and trusts must use

allocate QPAI to beneficiaries if DNI

More information. For more

Regulations section 1.652(b)-3 to

is distributed or required to be

information on figuring your Form

allocate Form W-2 wages to

distributed to beneficiaries. Report

W-2 wages, see Regulations section

beneficiaries if DNI is distributed or

the amount of QPAI allocated to

1.199-2 and Rev. Proc. 2006-47. You

required to be distributed to

beneficiaries on line 9. See Estates

can find Rev. Proc. 2006-47 on page

beneficiaries. Report the amount of

and trusts on page 2.

869 of I.R.B. 2006-45 at

the Form W-2 wages allocated to

pub/irs-irbs/irb06-45.pdf.

beneficiaries on line 17. See Estates

Line 11

and trusts on page 2.

For more information on figuring

Income Limitation

Form W-2 wages properly allocable

Line 22

to DPGR, see Temporary

Individuals. Enter your adjusted

Expanded Affiliated

Regulations section 1.199-2T(e)(2).

gross income from line 37 of Form

1040 figured without the DPAD.

Group Allocation

Corporations. Enter your taxable

The instructions below explain how

Specific Instructions

income from the applicable line of

expanded affiliated groups (EAGs)

your tax return (for example, line 30

(defined on page 2) figure and report

of Form 1120) figured without the

the DPAD. Certain members of an

Line 1

DPAD.

expanded affiliated group may not be

Domestic Production

required to complete the entire Form

Members of EAGs. See the

8903. See How To Report on page 9.

instructions for line 22.

Gross Receipts (DPGR)

Computation of the EAG’s

Agricultural and horticultural

Enter your DPGR (defined on page

cooperatives. Enter your taxable

3).

DPAD

income figured without the DPAD or

In general, the DPAD for an EAG is

the deductions for patronage

Line 2

determined by aggregating each

dividends, per-unit retain allocations,

member’s taxable income or loss,

and nonpatronage distributions under

Allocable Cost of Goods

QPAI, and Form W-2 wages. A

section 1382(b) or (c).

member’s QPAI may be positive or

Sold

Estates and trusts. Enter your

negative. Also, a member’s taxable

If you are not using the small

adjusted gross income figured without

income or loss and QPAI are

business simplified overall method,

the DPAD. See the Instructions for

determined under the member’s

enter your cost of goods sold

Form 1041 to figure adjusted gross

method of accounting.

allocable to DPGR (discussed on

income. Use the method discussed

Members with different tax years.

page 4).

under How to figure AGI for estates

If members of an EAG have different

and trusts, under Line 15b —

tax years, in determining the DPAD of

Line 3

Allowable Miscellaneous Itemized

a member, the reporting member

Deductions Subject to the 2% Floor.

If you are using the simplified

must take into account the taxable

deduction method (discussed on

Unrelated business taxable income

income or loss, QPAI, and Form W-2

page 5) or the section 861 method

(UBTI). An organization taxed on its

wages of each group member that

(discussed on page 6), enter the

UBTI under section 511 enters its

are both:

•

other deductions or losses you

UBTI from line 34 of Form 990-T

Attributable to the period that the

ratably apportion to DPGR.

figured without the DPAD.

member of the EAG and the reporting

-8-

Instructions for Form 8903

Instructions For Form 8903 - Domestic Production Activities Deduction - 2007 Page 8

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