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11738: 1120S - 8903 Deduction (Drake17 and prior)


1120S Sub S Corporate

Form 8903, Domestic Production Activities Deduction, is calculating a deduction on the 1120S, Schedule K, line 12. It is a combination of the totals for both lines 8 and 14 from the 8903.

 

Because an S corporation is a pass-through entity, it does not take the deduction for Form 8903, Domestic Production Activities Deduction. It is passed on to the shareholder and taken on the shareholder’s individual return, if eligible.

This deduction is subject to income limitations and may be limited by the shareholder’s basis. Shareholders use the pass-through amounts to calculate their eligibility for the deduction.

We have no conclusive evidence that we should carry the amount from line 1c of the 1120S to line 1 of the 8903 since the gross receipts are to be allocated between DPGR and non-DPGR. Reference page 3 of the instructions for Form 8903.

We have no conclusive evidence that we should carry the amount of salaries and wages to line 12 of the 8903 (could come from Schedule A or include officer compensation). There may be adjustments to the wages reported. Reference page 4 of the instructions for Form 8903.

Software Notes:

On the 8903 screen, if Print K1-8903 for each shareholder is not selected, the amounts flow to the K-1, box 12, with codes Q and R. A statement will generate showing the amount of total DPAD income and any wages entered on line 16 of the 8903 screen. The total of those amounts will appear on Schedule K, line 12d, along with the statement reference. This amount is listed for informational purposes only and is not included in line 18, Schedule K.

When printing of the K1-8903 is selected, the information flows to attachment K-1_8903 rather than line 12 on the K-1. Code P is printed on box 12 of Form K-1, which refers to domestic production activities information. No amount will appear on Schedule K, line 12d.

Line 11, Income limitation, of Form 8903 is not applicable for an S corporation because the income limitation is calculated at the shareholder level. Form W-2 wages on the 8903 screen refers to the corporation’s W-2 wages paid that are applicable to the Domestic Production Activities Deduction.

Note: The Domestic Production Activities Deduction was repealed for tax years beginning after 2017 by the Tax Cuts and Jobs Act. 


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