Question

Incorrect Question 18 0/0.2 pts In 2019, Kate Corp., had gross profit of $160M and business interest income of $2M. Kate Corp. also had deductible business expenses (other than interest and depreciation) of $60M, depreciation of $50M, and business interest expense of $40M. Kate Corp. is not a small corporation. What is Kate Corp.'s 2019 taxable income (after application of the business interest expense limitation)? Make sure to enter all of the zeros (e.g. 10M should be entered as 10,000,000). 58,000,000

In 2019, Kate Corp., had gross profit of $160M and business interest income of $2M. Kate Corp. also had deductible business expenses (other than interest and depreciation) of $60M, depreciation of $50M, and business interest expense of $40M. Kate Corp. is not a small corporation.

What is Kate Corp.'s 2019 taxable income (after application of the business interest expense limitation)? Make sure to enter all of the zeros (e.g. 10M should be entered as 10,000,000).

Answer 1

Calculation of the Taxable Income for Kate Corp.
Particulars	Amount($)
Gross Profit	$160,000,000
Add :
Business Interest Income	$2,000,000
Less :
Business Expenses	$60,000,000
Depreciation	$50,000,000
Business Interest Expenses (Expn.1)	$32,000,000
Taxable Income	$20,000,000
Expn. 1 Limitation on Busines Interest Expense Deduction Section 163(j).
Particulars	Amount($)
amount of deductible business interest expense cannot exceed the sum of:
(i) Business Interest Income	$2,000,000
(ii) 30% of the Adjusted Taxable Income (ATI)	$30,000,000
(iii) Floor Plan Financing Interest Expense	$0
Business Interest Expense Deduction Section 163(j)	$32,000,000
Calculation of the Adjusted Taxable Income (ATI)
Particulars	Amount($)
Taxable Income(As if Sec. 163(j) not applied) ((160 m + 2 m) - (60 m + 50 m + 40m)	$12,000,000
Additions :
Business Interest Expenses	$40,000,000
Depreciation	$50,000,000
Less:
Business Interest Income	$2,000,000
Floor Plan Financing Interest Expense	0
Adjusted Taxable Income (ATI)	$100,000,000