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Malloy Company’s earnings before interest, taxes, depreciation, depletion, and amortization are $2,000,000 in 2019. Mall...

Malloy Company’s earnings before interest, taxes, depreciation, depletion, and amortization are $2,000,000 in 2019. Malloy’s gross receipts have always exceeded $40,000,000. Malloy’s interest expenses is $800,000. Can Malloy deduct any interest expense? If so, how much and when?

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Answer #1

Tax Cuts and Jobs Act (TCJA) provides an exemption for taxpayers from the limitation on interest for those whose average annual gross receipts did not exceed $25 million for the three preceeding taxable years.

The deduction for any interest expense is limited to 30% of a taxpayers's adjusted taxable income. The deduction for taxable income does not incude business interest expenses and income, net operating losses,non business income and depreciation,amortization or depletion.

Malloy's gross receipts is exceeding $40,000,000, so there will be a deduction of interest expense.. 30% of Malloy's adjusted taxable income will be deducted at the end of the year.

30% of 2,000,000 = 6,00,000 will be the deduction of interest expense.

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