Domestic production deduction

[ILLMAS]

I have a new client and in 2011 the prior tax preparer prepared form 8903 and not in 2012, I asked the client and he doesn't know why it wasn't prepared since he still owns the plumbing company.  Anyway I am not to familiar with the form, but from reading the instructions, it seems one can include the income that pertains to qualified construction or remodeling, but if their business is mostly fixing leaking faucets, then that income is excluded?  I would appreciate the help from someone who has filled out this form before.

 

Thanks

[Lee B]

Yes, Construction of real property and substantial renovation of real property both qualify for the DPAD.

You have segregate the qualifying and nonqualifying gross receipts and then you can allocate COGS,

direct costs and indirect costs using one of the specified allocation methods to arrive at QPAI.

[WITAXLADY]

ah - good point - I never thought of construction! however, that would mean they had payroll!

[Lee B]

Yes, I have also had Coffee Roasters, a Bottled Water Service and Engineering Firm also qualify.

[mcb39]

Don't they HAVE to have employees to qualify?

[Lion EA]

Yes, as was mentioned, payroll.  I think the cap is 1/2 W-2 income.  I see so many PTPs that give detailed tables with all the info, but the W-2 line is $0.