Question

FruAgro Company has average annual gross receipts of $68 million annually. This year, FruAgro earned $2 million of business interest income, incurred $8 million of business interest expense and has adjusted taxable income of $18 million. Compute FruAgro’s current deduction for business interest and the amount of any business interest carryforward. (Enter your answers in dollars not in millions of dollars.)

Business interest deduction $

Business interest carryforward $

Answer 1

Particulars	Amount ($)	Amount ($)
Annual gross receipt	68,000,000
less: Business Interest expense	7,400,000
Taxable income		60,600,000

Working Notes;

1)

This limit equals to sum of Business Income and 30% of Adjusted total income

therefore business income is $2,000,000 and ATI is 5,400,000 (30% of 18,000,000) which makes a total of $7,400,000

2)

Calculation of amount to be carry forward: Business Interest expense less deduction allowed

$8,000,000-$7,400,000= $6,000,000