In the current year, Nighthawk Corporation, a calendar year C corporation, has $4,360,000 of adjusted taxable income and $130,800 of business interest income. Nighthawk has no floor plan financing interest. The business interest expense for the year is $1,744,000. Required:
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.