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Peter M. Fass Peter M. Fass

Section 163(j) of the Internal Revenue Code (Code) as amended by the Tax Cut and Jobs Act (Tax Act) provides for 30% adjustable taxable income (ATI) limitation for business interest. Starting in 2018, business interest expenses are deductible only to the extent of business interest income plus 30% of ATI. “Business interest” is interest paid or accrued with respect to indebtedness allocable to a trade or business. It does not include investment interest expense. Interest disallowed amount may be carried forward indefinitely. Businesses with average annual gross receipts of $25 million or less are exempt from the limitation. On Nov. 26, 2018, the Internal Revenue Service (IRS) released Proposed Regulations (Prop. Regs.) providing guidance on the interest deduction limitation rules under §163(j).

 

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