CL LLC is a manufacturing business and reported "adjusted taxable income in 2023 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. Question Content Area a. How much interest expense can CL deduct? Sfill in the blank 0bff8ef2bfe5013_1 What happens to any additional interest expense? The Sfill in the blank Obff8ef2bfe5013_2 of investment interest expense a separately stated item on Schedule K. Feedback Area Feedback If a partnership pays interest expense, it must be allocated among the partnership's various activities, generally based on how and why the underlying debt arose. Special rules apply to business interest expense. For a partnership or an S corporation, in the year the interest expense arises, the entity determines the amount that can be deducted. Question Content Area b. How is the interest expense reported on CL's Schedules K-1? On Schedules K-1, CL allocates the Sfill in the blank 0c5b83fce02bfe0_1 of investment interest expense as a stated deduction. In addition, it reports the Sfill in the blank 0c5b83fce02bfe0_3 of excess business interest as a stated item. Feedback Area Feedback Correct Question Content Area c. What action, if any, is needed by the LLC members? In the current year, the LLC members will deduct their distributive shares of the to the extent permitted. In future years, the LLC members can deduct their distributive shares of the carryover against excess taxable income the LLC allocates to the members in those future years. Feedback Area Feedback Correct Question Content Area d. How would your answers to parts (a) through (c) change if CL's adjusted taxable income 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)? If average annual gross receipts do not exceed Sfill in the blank 11cb1403e07603f_1 for the prior tax year, the business interest expense limitation apply, so all business interest expense is currently by the LLC.

CL LLC is a manufacturing business and reported "adjusted taxable income in 2023 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. Question Content Area a. How much interest expense can CL deduct? Sfill in the blank 0bff8ef2bfe5013_1 What happens to any additional interest expense? The Sfill in the blank Obff8ef2bfe5013_2 of investment interest expense a separately stated item on Schedule K. Feedback Area Feedback If a partnership pays interest expense, it must be allocated among the partnership's various activities, generally based on how and why the underlying debt arose. Special rules apply to business interest expense. For a partnership or an S corporation, in the year the interest expense arises, the entity determines the amount that can be deducted. Question Content Area b. How is the interest expense reported on CL's Schedules K-1? On Schedules K-1, CL allocates the Sfill in the blank 0c5b83fce02bfe0_1 of investment interest expense as a stated deduction. In addition, it reports the Sfill in the blank 0c5b83fce02bfe0_3 of excess business interest as a stated item. Feedback Area Feedback Correct Question Content Area c. What action, if any, is needed by the LLC members? In the current year, the LLC members will deduct their distributive shares of the to the extent permitted. In future years, the LLC members can deduct their distributive shares of the carryover against excess taxable income the LLC allocates to the members in those future years. Feedback Area Feedback Correct Question Content Area d. How would your answers to parts (a) through (c) change if CL's adjusted taxable income 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)? If average annual gross receipts do not exceed Sfill in the blank 11cb1403e07603f_1 for the prior tax year, the business interest expense limitation apply, so all business interest expense is currently by the LLC.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 47P

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