The Tax Cuts and Jobs Act of 2017 enacted revisions to the Sec. 163(j) limitation on deductible interest expense for tax years beginning after 12/31/2017. Assume the following facts:

USA Co., a corporation organized in the U.S., reflected total U.S. federal taxable income of $85,000,000 for the 2019 tax year. Components of U.S. federal taxable income include: interest income of $1,500,000, tax depreciation of $14,500,000, tax amortization of $3,000,000 from Sec. 197 intangibles recently acquired and utilization of a 2015 federal net operating loss carryforward of $2,100,000. USA Co.’s 2019 U.S. federal taxable income also included a deduction for interest expense of $55,200,000 on debt to related party and third-party lenders.

Using the facts provided above for Question #1, compute the following:

1. Adjusted Taxable Income as defined in Sec. 163(j),
2. USA Co.’s interest expense deduction allowed under Sec 163(j) for the 2019 tax year, and the disallowed business interest expense carryforward under Sec. 163(j) available for future tax years.

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Solution 1 Computation of Adjusted Taxable Income as defined in Sec163j Under sec 163j adjusted taxa... View the full answer