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?
A) $375,000
B) $522,000
C) $1,500,000
D) $300,000
E) $228,000

Answer 1

Answer:

B) $522,000

Explanation:

Calculation for the maximum business interest deduction

Using this formula

Maximum business interest deduction =(Allocable taxable income+Deductible expenses of business interest +Depreciation)× Standard Tax rate

Let plug in the formula

Maximum business interest deduction =

($1,250,000 + 240,000 + 250,000) × 30%

Maximum business interest deduction =$1,740,000*30%

Maximum business interest deduction = $522,000

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