2.99 See Answer

Question: CL LLC is a manufacturing business and

CL LLC is a manufacturing business and reported taxable income of $40 million before interest expense, taxes, depreciation, and amortization ("tax EBITDA"), plus $1.5 million of separately stated investment income. CL incurred interest expense of $1 million in connection with this investment income and $14 million in connection with its trade or business.
a. How much interest expense can CL deduct?
b. How is the interest expense reported on CL's Schedule K?
c. What action, if any, is needed by the LLC members'
d. How would your answers to parts (a) through (c) change if CL's tax EBITDA was $4 million (plus $150,000 of investment income), its average annual gross receipts for all prior tax years was $10 million or less, and the interest expense amounts were $100,000 (investment) and $1.4 million (business)?