Question

George operates a business that generated revenues of $50 million and allocable taxable income of $1.25 million. Included in the computation of allocable taxable income were deductible expenses of $240,000 of business interest and $250,000 of depreciation. What is the maximum business interest deduction that George will be eligible to claim this year?

Answer 1

Answer:

The maximum business interest deduction that George will be eligible to claim this year is $522,000

Explanation:

For computing the maximum business interest deduction, first, we have to compute the adjusted taxable income. So, the computation of adjusted taxable income is shown below:

= Allocable taxable income + business interest + depreciation amount

= $1,250,000 + $240,000 + $250,000

= $1,740,000

Now the business interest deduction is 30% of adjusted taxable income

So, the maximum business interest deduction would be

= Adjusted taxable income × deduction rate

= $1,740,000 × 30%

= $522,000