b.
Compute business interest expense as follows:
million | |
Income before tax | 85 |
Less: total expense | -78.1 |
6.9 | |
Add: depreciation | 12.7 |
Add: net interest expense | 10.5 |
Adjusted taxable income | 30.1 |
Interest (30% * 30.1) | 9.03 |
Thus, business interest expense is 9.03 million.
c.
Compute maximum deduction allowed as follows:
million | |
Income before interest limitation | 6.9 |
Add: interest expense | 5.5 |
Add: depreciation | 12.7 |
Adjusted taxable income | 25.1 |
Interest (30% * 25.1) | 7.53 |
Maximum deduction allowed | 5.5 |
lower of 7.53 or 5.5) |
Thus, maximum deduction allowed of interest is 5.5 million.
Required information [The following information applies to the questions displayed below.] Renee operates a proprietorship selling...
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