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Suppose instead that Rock Island Corporation generated taxable income of $600,000 this year. Taxable income was...

Suppose instead that Rock Island Corporation generated taxable income of $600,000 this year. Taxable income was computed on $50 million of revenues and included $30,000 of interest income, $500,000 of interest expense, and $80,000 of depreciation. What would Rock Island's actual interest deduction be for the year?

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Answer #1
Rock Island's actual interest deduction be for the year:
Interest income $   30,000.00
Add: 30% x ($600,000 - $30,000) $ 171,000.00
Actual interest deduction $ 201,000.00
The business interest deduction is the amount of interest income plus 30% of the taxable income
The adjusted taxable income of a taxpayer means the taxable income of the taxpayer computed without regard to any non-trade or business related items of income or deduction, business interest or business interest income, net operating loss deductions
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