XZ Partnership has two equal partners. Assume no taxpayer qualifies for the small business exception. XY earns
$16 million of non- interest ordinary income and incurs $6 million of interest expense.
a. How much interest expense can the partnership deduct in determining the partnership's ordinary income?
b. What is each partner's share of the partnership's ordinary income?
c. If the interest expense is not fully deducted this year, how is the excess treated?

Question

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The Answer of XZ Partnership has two equal partners. Assume no taxpayer qualifies for the small business exception. XY earns
$16 million of non- interest ordinary income and incurs $6 million of interest expense.
a. How much interest expense can the partnership deduct in determining the partnership's ordinary income?
b. What is each partner's share of the partnership's ordinary income?
c. If the interest expense is not fully deducted this year, how is the excess treated?

XZ Partnership Has Two Equal Partners