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Northwest Company has average gross receipts of $50 million annually. This year, Northwest incurred $10.5 million of net business interest and has adjusted taxable income of $29 million. Compute Northwest’s current deduction for business interest and the amount of any business interest carryforward. (Enter your answers in dollars not in millions of dollars.)

Respuesta :

Answer:

Deduction = $8.7 million

Business interest carry forward  = $1.8 million

Explanation:

given data

average gross receipts = $50 million annually

net business interest = $10.5 million

adjusted taxable income = $29 million

solution

we know as per the amended rule for the interest deduction and carry forward is

Sum of following will be allowed as deduction:-  

  1. Business interest income for the taxable year
  2. 30℅ of Adjusted taxable income of the tax year
  3. The taxpayer's floor plan financing interest paid

and here limit is applicable for all but except average annual gross receipt which is less than the $25 million

so that company have average annual receipt limit is applied.

and Deduction will  be

Deduction = 30℅ of Adjusted Taxable income

Deduction = 30℅ of $29 million

Deduction = $8.7 million

and

Business interest carry forward =  Actual - deduction allowed

Business interest carry forward  = $10.5 million - $8.7 million

Business interest carry forward  = $1.8 million

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