Question

In general, what is the limitation on the deductibility of business interest expense? What happens to...

In general, what is the limitation on the deductibility of business interest expense? What happens to any business interest deduction disallowed under the limitation?

The limitation is_____ of (1) the taxpayer’s________ for the year, (2)_________ of the taxpayer’s________ for the year, and (3) the taxpayer’s________ for the year. Any business interest deduction disallowed by the limitation is____________ .

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Generally a person can deduct interest expense from income in taxable year. However there is limitation on deductability of interest expense as per section 163(j) & this section applies to all taxpayers having business interest expense other than small businesses.

The limitation is sum of (1) the taxpayer’s business interest income for the year, (2) 30% of the taxpayer’s adjusted taxable income (ATI) for the year, and (3) the taxpayer’s floor plan financing interest expense for the year. Any business interest deduction disallowed by the limitation is carried forward to succeeding taxable years and treated as interest expense in subsequent year.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What does the new limitation on excess business losses require all taxpayers except C corporations? Excess...
What does the new limitation on excess business losses require all taxpayers except C corporations? Excess business losses must be deducted in full in the year incurred. Excess business losses must be carried back 2 years with any excess carried forward 20 years. Excess business losses must be carried forward and deducted under the rules for NOLs in subsequently taxable years. Excess business losses must be carried forward and deducted in equal installments over 8 years.
How does a partnership report its income for tax purposes? Who makes most elections related to...
How does a partnership report its income for tax purposes? Who makes most elections related to partnership income and deductions? In keeping with the (aggregate/ entity/ consolidated) concept, a partnership must file (a tax reporting/ an informational) return, Form (1120/ 1041/ 1040/ 1065) . On this return, (each partner/ the partnership) makes most elections regarding the treatment of partnership items and no tax is calculated. Compare the treatment of the business interest expense limitation versus the qualified business income deduction....
Gilbert is the proprietor of a small business. In 2017, the business income, before consideration of...
Gilbert is the proprietor of a small business. In 2017, the business income, before consideration of any cost recovery or § 179 deduction, is $3,000,000. Gilbert spends $2,500,000 on new seven-year class assets (use half year convention), and elects to take the § 179 deduction on them. He elects not to take additional first-year depreciation. Gilbert's cost recovery deduction for 2017, for 5-year asset purchases, is $780,000. If an amount is zero, enter "0". If required, round your intermediate computations...
1. [LO 1] Q1 What is an “ordinary and necessary” business expenditure? 2. [LO 1] Q2...
1. [LO 1] Q1 What is an “ordinary and necessary” business expenditure? 2. [LO 1] Q2 Explain how cost of goods sold is treated when a business sells inventory. 3. [LO 1] Q3 Whether a business expense is “reasonable in amount” is often a difficult question. Explain why determining reasonableness is difficult and describe a circumstance where reasonableness is likely to be questioned by the IRS. 4. [LO 2] Q5 What kinds of deductions are prohibited as a matter of...
Question 7 An example of an expense not allowed as a deduction under Code Sec. 162(a)...
Question 7 An example of an expense not allowed as a deduction under Code Sec. 162(a) would be: Question 7 options: 1) a speeding ticket. 2) an expense incurred while operating an illegal gambling business. 3) a government imposed penalty. 4) both a and c. 5) all of the above. Question 8 During the current year, a calendar year corporation incurred $52,000 of research and experimental expenditures. The corporation elects to capitalize and amortize the costs over 60 months. If...
1. What amount if any liability should ABC recognize at December 31, 2016 related to the...
1. What amount if any liability should ABC recognize at December 31, 2016 related to the tax effects of these four deductions? (ignore possible interest and penalties) this is the information need to answer this question: ABC Co. took four tax deductions on their 2016 tax return that have issues that could result in some or all of the deductions being disallowed if ABC’s 2016 tax return is audited. ABC believes the deductions are justifiable but knows that tax law...
Charley Inc is a large corporation that reported revenue of $80 million and expenses (other than...
Charley Inc is a large corporation that reported revenue of $80 million and expenses (other than interest) of $78 million in 2019. Included in the expenses is depreciation of $300,000. Charley Inc. paid business interest of $1,000,000 in 2019. What is the maximum amount of interest expense deduction this year? Assume the small business exception does not apply. Apply the rules as explained in the textbook (30% of ATI); however, make sure you are aware how the CARES Act changed...
Lanyard purchased office equipment for use in his business (7 year property). He paid 100,000 for...
Lanyard purchased office equipment for use in his business (7 year property). He paid 100,000 for the equipment on july 1, 2017. Lanyard did not purchase any other property during the year. for 2017, his business ha a net income of 350,000, before depreciation and before considering the election to expense. A) what is the maximum amount that lanyard can deduct in 2017 under the election to expense? B) What is the total depreciation (regular depreciation under the amount allowed...
1) Hazel purchased a used business asset (five-year property) on March 10, 2017 at a cost...
1) Hazel purchased a used business asset (five-year property) on March 10, 2017 at a cost of $80,000. She did not elect to expense any of the assets under Section 179 or 1st year bonus depreciation. Hazel sold the asset on January 20, 2019. Determine the depreciation deduction for 2019.    2) Barry purchased a business asset (five-year property) on November 30, 2018 at a cost of $100,000. This is the only asset he purchased during the year. Barry did not...
1.What happens to the price of a six-year bond with an 8% coupon when interest rates...
1.What happens to the price of a six-year bond with an 8% coupon when interest rates change from 9% to 8%? 2.What is the NPV of a project that costs $285,000 today and no cash inflows for 3 years, followed by cash inflows $95,000 annually for the next five years, if the opportunity cost of capital is 2%?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT