Renee manufactured and sold a “gadget,” a specialized asset used by auto manufacturers that qualifies for the domestic production activities deduction.
Renee incurred $15,000 in direct expenses in the project which includes $2,000 of wages Renee paid to employees in the manufacturing of the gadget. What is
Renee’s domestic production activities deduction for the gadget in each of the following alternative scenarios?

a. Renee sold the gadget for $25,000 and she reported AGI of $75,000 before considering the manufacturing deduction.

b. Renee sold the gadget for $25,000 and she reported AGI of $5,000 before considering the manufacturing deduction.

c. Renee sold the gadget for $40,000 and she reported AGI of $50,000 before considering the manufacturing deduction.