Question

renee operates a proprietorship selling collectibles over the web. this year, renee's business reported revenue of $95.5 million and deducted $88.6 million in expenses and loss carryovers. her business deductions included cost of goods sold of $48.5 million, sales commissions paid of $16.9 million, $10.5 million of interest paid on a mortgage, $10.7 million of depreciation, and $2 million deduction for a net operating loss carryover. c. suppose that renee's revenue includes $5 million of business interest income. what is the maximum amount of business interest expense that could be deducted this year under the business interest limitation?

Answer 1

The maximum deductible business interest expense depends on the tax code provisions regarding adjusted taxable income, which can be typically 30% of such income. However, without the specific tax code details, including how the $5 million of business interest income affects the limitation, an accurate calculation is not possible. A consultation with a tax professional is recommended for the precise amount.

Step-by-step explanation:

The maximum amount of business interest expense that Renee could deduct under the business interest limitation can be determined using the tax rules applicable to the situation.

To calculate the maximum deductible business interest expense, one would typically consider 30% of the adjusted taxable income of the business. In this scenario, the adjusted taxable income would have to be calculated by starting with the reported revenue and then subtracting the business expenses other than the interest expense. However, since the specific current year tax code details and any potential exceptions or modifications are not provided in the question, it is not possible to calculate the exact figure without additional information.

Additionally, the inclusion of $5 million of business interest income may affect the calculation under certain tax codes, as income from business interest can sometimes change the limitation amounts. Therefore, to ensure compliance with the tax code and to accurately determine the maximum amount of business interest expense, it would be prudent for Renee to consult with a tax professional who can factor in all the latest tax code details and her specific financial situation.