2013 Gift Basket & Production Activities Deduction

There is a recent tax court case that applies to gift baskets.

For a number of years there has been something called the Production Activities Deduction (PAD). It generally applies to MANUFACTURING. This tax court case may open a deduction for flower shops and other companies that assemble gift baskets.

If your bottom line income to the company is $50k from the applicable sales, the PAD is 9% (for 2012 and 2013). That is a $4,500 deduction. Apply a tax bracket of 25% and the savings is $1,125.

If the company showed a loss, the PAD would not apply.

It would not apply to just flowers. It would apply to gift baskets when you purchase other items (candy, cheese, etc) and ‘assemble’ them.

If this is the case, then we would need to know…..

Sales total for these items. Let’s say this is 20% of your sales. We would then also ask if 20% of wages, 20% of all expenses applies. A different percentage could very well apply especially for the real manufacturing entities.

In 10 minutes we could calculate what the savings would be.


In 2010 and 2011 the PAD was 6%. The statute of limitations would not allow amendments back further than 2010.

We can help prepare these amendments at www.USATaxHelp.com

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