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)$522,200
C)$1,500,000
D)$300,000
E)$228,000

Question

Quizplus · Accepted Answer

The maximum business interest deduction that George can claim is 30% of his allocable taxable income, which is $375,000. However, this amount is subject to adjustment based on certain factors. One of those factors is depreciation, which in George's case is $250,000. So the adjusted maximum business interest deduction is $125,000 ($375,000 - $250,000).

George Operates a Business That Generated Revenues of $50 Million