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FruAgro Company has average annual gross receipts of $30 million annually. This year, FruAgro earned $1...

FruAgro Company has average annual gross receipts of $30 million annually. This year, FruAgro earned $1 million of business interest income, incurred $10 million of business interest expense and has adjusted taxable income of $17 million.

Required:
Compute FruAgro’s current deduction for business interest and the amount of any business interest carryforward.

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Answer #1

Particulars

Amount ($)

Amount ($)

Annual gross receipt

30,000,000

less: Business Interest expense (Notes-1)

6,100,000

Taxable income

23,900,000

Working Notes:

(1)

Calculation of deduction: This limit equals to sum of

Business Income and 30% of Adjusted total income

therefore business income is $1,000,000 and ATI is 5,100,000 (30% of 17,000,000) which makes a total of $6,100,000

(2)

Calculation of amount to be carried forward: Business Interest expense less deduction allowed

i.e $10,000,000-$6,100,000= $3,900,000

I HOPE IT USEFUL TO YOU IF YOU HAVE ANY DOUBT PLZ COMMENT GIVE ME UP-THUMB. THANKS.....

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