FruAgro Company has average annual gross receipts of $32 million annually. This year, FruAgro earned $3 million of business interest income, incurred $7 million of business interest expense and has adjusted taxable income of $7 million. Compute FruAgro’s current deduction for business interest and the amount of any business interest carryforward. (Enter your answers in dollars not in millions of dollars.)
COMPUTATION
Particulars | Amount ($) | Amount ($) |
Annual gross receipt | 32000000 | |
less:Business Interest expense (W.N-1) | 5100000 | |
Taxable income | 26900000 |
Working Notes;
W.N-1
Calculation of deduction: This limit equals to sum of
Business Income and 30% of Adjusted total income
therefore business income is $3000000 and ATI is 2100000 (30% of 7000000) which makes a total of $5100000
W-N 2
Calculation of amount to be carried forward: Business Interest expense less deduction allowed
i.e $7000000-$5100000= $1900000
FruAgro Company has average annual gross receipts of $32 million annually. This year, FruAgro earned $3...
FruAgro Company has average annual gross receipts of $74 million annually. This year, FruAgro earned $3 million of business interest income, incurred $11 million of business interest expense and has adjusted taxable income of $21 million. Compute FruAgro's current deduction for business interest and the amount of any business interest carryforward. (Enter your answers in dollars not in millions of dollars) Business interest deduction Business interest carryforward
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.
I can't figure out why this is wrong? Isn't the Business
Interest Deduction 30% of the business' Adjusted Taxable Income?
The book has a similar example that says the current deduction is
exactly that. So if the Adjusted Taxable Income $22 million then it
should be x 30% which equals $6,600,000 maximum deduction in the
current year, with the excess of the net interest expense
($10,000,000) carried forward into the following year
($3,400,000).
FruAgro Company has average annual gross receipts...
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For a business with no interest income, what is the limitation
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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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