In the current year, Tern, Inc., a calendar year C corporation, has $9 million of adjusted taxable income, $300,000 of business interest income, zero floor plan financing interest, and $3.2 million of business interest expense. Tern has average gross receipts for the prior three-year period of $45 million. Which of the following statements is correct about the treatment of Tern's business interest expense?

Group of answer choices

Current year deduction of $3 million, carryback of $200,000.

Current year deduction of $2,790,000, carryback of $410,000.

Current year deduction of $3 million, carryforward of $200,000.

Current year deduction of $3.2 million.

Current year deduction of $2,790,000, carryforward of $410,000.

Question

Business

Elisa Bond

7 April, 02:42

In the current year, Tern, Inc., a calendar year C corporation, has $9 million of adjusted taxable income, $300,000 of business interest income, zero floor plan financing interest, and $3.2 million of business interest expense. Tern has average gross receipts for the prior three-year period of $45 million. Which of the following statements is correct about the treatment of Tern's business interest expense?

Group of answer choices

Current year deduction of $3 million, carryback of $200,000.

Current year deduction of $2,790,000, carryback of $410,000.

Current year deduction of $3 million, carryforward of $200,000.

Current year deduction of $3.2 million.

Current year deduction of $2,790,000, carryforward of $410,000.

+5

Answers (1)

Know the Answer?

Marlene Noble · Answer 1

correct option is Current year deduction of $3 million, carry forward of $200,000.

Explanation:

given data

adjusted taxable income = $9

business interest income = $300,000

business interest expense = $3.2 million

average gross receipts = $45 million

solution

correct answer is Current year deduction of $3 million, carry

forward of $200,000. because Business interest deduction limitation

as here Business Interest Income is $300000

plus + 30% of $9m

that is = $2700000

so here current year total deduction = $3000000

and Remaining will be allowed next year is $200,000