George operates a business that generated revenues of $54 million and allocable taxable income of $1.29 million. Included in the computation of allocable taxable income were deductible expenses of $242,000 of business interest and $252,000 of depreciation. What is the maximum business interest deduction that George will be eligible to claim this year?

Question

Quizplus · Accepted Answer

The maximum business interest deduction is generally limited to 30% of the business's adjusted taxable income (ATI). ATI is calculated by adding back interest and depreciation to the allocable taxable income. Here, ATI = $1,290,000 + $242,000 + $252,000 = $1,784,000. The maximum interest deduction is 30% of $1,784,000, which is $535,200.

George Operates a Business That Generated Revenues of $54 Million