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6 January, 04:44

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?

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  1. 6 January, 04:45
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    The maximum business interest deduction that George will be eligible to claim this year is $522,000

    Explanation:

    For computing the maximum business interest deduction, first, we have to compute the adjusted taxable income. So, the computation of adjusted taxable income is shown below:

    = Allocable taxable income + business interest + depreciation amount

    = $1,250,000 + $240,000 + $250,000

    = $1,740,000

    Now the business interest deduction is 30% of adjusted taxable income

    So, the maximum business interest deduction would be

    = Adjusted taxable income * deduction rate

    = $1,740,000 * 30%

    = $522,000
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