Question

George operates a business that generated revenues of $55 million and allocable taxable income of $1.30 million. Included in the computation of allocable taxable income were deductible expenses of $242,500 of business interest and $252,500 of depreciation. What is the maximum business interest deduction that George will be eligible to claim this year?

Answer 1

$538,500

Step-by-step explanation:

The computation of maximum business interest deduction is shown below:-

Adjusted Taxable income = Taxable income + Deductible expenses + Depreciation

= $1,300,000 + $242,500 + $252,500

= $1,795,000

Maximum business interest deduction = Adjusted Taxable income × Business interest deduction

= $1,795,000 × 30%

= $538,500

Here we assume maximum business interest deduction is 30% of Adjusted Taxable income.