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?

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