During the year, LMN LLC reported gross income of $60,000, cost of goods sold of $16,000, utilities and similar cash expenses of $10,000, depreciation expense of $4,000, business interest expense of $20,000, and investment interest expense (for long-term investments) of $1,000. (All amounts are in thousands, and the small business exception does not apply. LMN did not have any additional interest expense or taxes this year.)
a. How much interest expense can the LLC deduct on Form 1040, page 1? Why?
b. How is any remaining interest expense reported and treated for tax purposes?
c. How much is the LLC's ordinary business income (Form 1065, page 1)?
d. What separately stated items and other types of information might be reported on the LLC's Schedule K?

Question

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The Answer of During the year, LMN LLC reported gross income of $60,000, cost of goods sold of $16,000, utilities and similar cash expenses of $10,000, depreciation expense of $4,000, business interest expense of $20,000, and investment interest expense (for long-term investments) of $1,000. (All amounts are in thousands, and the small business exception does not apply. LMN did not have any additional interest expense or taxes this year.)
a. How much interest expense can the LLC deduct on Form 1040, page 1? Why?
b. How is any remaining interest expense reported and treated for tax purposes?
c. How much is the LLC's ordinary business income (Form 1065, page 1)?
d. What separately stated items and other types of information might be reported on the LLC's Schedule K?

During the Year, LMN LLC Reported Gross Income of $60,000