Question

Roose, Inc. reported revenue of $92 million and incurred total expenses of $84 million. The total expenses included cost of goods sold of $50 million, salaries and other administrative expenses of $9 million, $11 million of interest paid on a building's mortgage, and $14 million of depreciation. Assuming Roose is subject to the interest expense limitation, what amount of interest expense can the business deduct in the current year

Answer 1

Answer:

Roose, Inc.

The business can deduct $9.5 million in the current year.

Explanation:

Revenue = $92 million

Expenses allowed = 73 million ( $84 - $11 million for interest expense)

Adjusted taxable income before interest = $19 million

50% of adjusted taxable income = $9.5 million

Disallowed interest expense in the current year = $1.5 million

The interest expense allowed (deductible) is 50% for 2019 and 2020, as amended by the CARES Act) of the taxpayer's adjusted taxable income.