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?
Homework Answers
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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For a business with no interest income, what is the limitation
on business interest deductions?
What businesses are not subject to this limitation?
For a business that is subject to the limitation, what benefit
can the business get from interest payments that exceed the limit?
Give an example. For this question please refer to the screen shot
posted.
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Green Caterpillar is able to achieve this level of increased
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The company’s operating costs (excluding depreciation and
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3.
The company’s tax rate remains constant at 40% of its pre-tax
income or earnings before taxes (EBT).
4.
In Year 2, Green Caterpillar expects...
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For a business with no interest income, what is the limitation
on business interest deductions?
What businesses are not subject to this limitation?
For a business that is subject to the limitation, what benefit
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Give an example. For this question please refer to the screen shot
posted.
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What was Frazier & Son's earnings before interest,
taxes, depreciation and amortization (EBITDA) for the year
20Y2?
1)$45,500
2)$52,800
3)$59,800
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2.
The company’s operating costs (excluding depreciation and
amortization) remain at 65.00% of net sales, and its depreciation
and amortization expenses remain constant from year to year.
3.
The company’s tax rate remains constant at 40% of its pre-tax
income or earnings before taxes (EBT).
4.
In Year 2, Green Caterpillar expects...
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