George operates a business that generated revenues of $50 million and allocable taxable income of $1.25 million. Included in the computation of allocable taxable income were deductible expenses of $240,000 of business interest and $250,000 of depreciation. What is the maximum business interest deduction that George will be eligible to claim this year?

The maximum business interest deduction that George will be eligible to claim this year is $522,000

Explanation:

For computing the maximum business interest deduction, first, we have to compute the adjusted taxable income. So, the computation of adjusted taxable income is shown below:

= Allocable taxable income + business interest + depreciation amount

= $1,250,000 + $240,000 + $250,000

= $1,740,000

Now the business interest deduction is 30% of adjusted taxable income

So, the maximum business interest deduction would be

= Adjusted taxable income * deduction rate

= $1,740,000 * 30%

= $522,000