Question

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 as10,000,000).

Answer 1

B C D 31 (in $) 32 Gross Profit 160000000 33 Add: business interest income 2000000 34 Less: deductible business expenses 60000000 35 Less: Depreciation 50000000 36 Less : Business Interest Expense (Note 1) 32000000 37 (Carry forward 8000000) 38 Taxable income 20000000 39 40 Note 1:- Calculation of Interest deduction Limitation: 41 business interest expense deduction for the tax year can't exceed the sum of: 42 1) business interest income, plus 43 2) 30% of adjusted taxable income*, plus 44 3) any floor plan financing interest expense. Business interest Expenses 2000000 30000000 (100000000*30%) 45 32000000 46 47 Adjusted Taxable income:- 48 Gross Profit 49 Less: deductible business expenses 50 Adjusted Taxable income 51 160000000 60000000 100000000