CL LLC is a manufacturing business and reported taxable income of $40,000,000 before interest expense, taxes, depreciation, and amortization (“tax EBITDA”), plus $1,500,000 of separately stated investment income. CL incurred interest expense of $1,000,000 in connection with this investment income and $14,000,000 in connection with its trade or business. How much interest expense can CL deduct? How is the interest expense reported on CL’s Schedule K? What action, if any, is needed by the LLC members?

CL LLC is a manufacturing business and reported taxable income of $40,000,000 before interest expense, taxes, depreciation, and amortization (“tax EBITDA”), plus $1,500,000 of separately stated investment income. CL incurred interest expense of $1,000,000 in connection with this investment income and $14,000,000 in connection with its trade or business. How much interest expense can CL deduct? How is the interest expense reported on CL’s Schedule K? What action, if any, is needed by the LLC members?

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 16DQ

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CL LLC is a manufacturing business and reported taxable income of $40,000,000 before interest expense, taxes, depreciation, and amortization (“tax EBITDA”), plus $1,500,000 of separately stated investment income. CL incurred interest expense of $1,000,000 in connection with this investment income and $14,000,000 in con-nection with its trade or business. a.How much interest expense can CL deduct? b.How is the interest expense reported on CL’s Schedule K? c.What action, if any, is needed by the LLC members? d.How would your answers to parts (a) through (c) change if CL’s tax EBITDA was $4,000,000 (plus $150,000 of investment income), its average annual gross receipts for all prior tax years was $10,000,000 or less, and the interest expense amounts were $100,000 (investment) and $1,400,000 (business)?
FGH Corporation had the following in 2021: Sales P 3.4M; Cost of sales P 1.2M; Admin expense P 0.3M; Selling expenses P .5M; other taxable income from operations P .1M. 1. What is deductible expense if the company uses OSD? 2. Using the problem above, what is the income tax payable?
The ABC Corporation has net income reported on its books of $120, 500. For the current year, the corporation had federal income tax expense of $30,000, a net capital loss of $ 8,300, and tax-exempt interest income of $5,300. The company deducted depreciation of $20,000 on its tax return and $15,000 on its books. Calculate the ABC Corporation's taxable income.
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In each of the following independent cases, determine the amount of business interest expense deduction and disallowed interest expense carryforward, if any. Required: a. Company A has ATI of $82,000 and business interest expense of $23,00. b. Company B has ATI of $108,000, business interest expense of $44,000, and business interest income of $3,200. c. Company C has taxable income of $59,600 which includes business interest expense of $64,800 and depreciation of $56,000. Amount a. Carryforward b. Carryforward c. Carryforward