In 2019, Nighthawk Corporation, a calendar year C corporation, has $3,700,000 of adjusted taxable income, $125,000 of business interest income, zero floor plan financing interest, and $1,400,000 of business interest expense.
a. Assume that Nighthawk has average gross receipts for the prior three-year period of $33,000,000. Determine Nighthawk’s current year deduction for business interest.
b. Assume that Nighthawk has average gross receipts for the prior three-year period of $23,000,000. Determine Nighthawk’s current year deduction for business interest.