For 2018, UNA Corporation has $500,000 of adjusted taxable income, $22,000 of bu

Question

For 2018, UNA Corporation has $500,000 of adjusted taxable income, $22,000 of business interest income, and $120,000 of business interest expense. It has average annual gross receipts of more than $25 million over the prior three taxable years. Interest exepense deduction for 2018 is 120,000. Beginning in 2018, the TCJA of 2017 disallows a number of other expenditures that were previously deductible. Net interest expense is limited and Any disallowed interest is carried forward indefinitely. The limitation does not apply to businesses that have annual average gross receipts of $25 million or less during the prior three taxable years.

How much interest expense can be deducted for 2018 if UNA's adjusted taxable income is $300,000?

Explanation / Answer

In this case UNA corporation have annuall average gross receipts more than $25 millions over past 3 years.

Now as per Tax Cuts and Jobs Act 2017 (TCJA 2017) further reference under 163(j) of IRC allows only up to 30% of Adjusted Taxable Income ie $300000*30/100= $90000 or Business interest income___ which ever is low.

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