LO.6CL LLC is a manufacturing business and reported adjusted taxable income in 2023 of $40,000,000, plus $1,500,000 of separately stated investment income. CL incurred interest expense of $1,000,000 in connection with this investment income and $14,000,000 in connection with its trade or business.

a. How much interest expense can CL deduct? What happens to any additional interest expense?

b. How is the interest expense reported on CLs Schedules K1?

c. What action, if any, is needed by the LLC members?

d. How would your answers to parts (a), (b), and (c) change if CLs adjusted taxable income was $4,000,000 (plus $150,000 of investment income), its average annual gross receipts for all prior tax years was $10,000,000 or less, and the interest expense amounts were $100,000 (investment) and $1,400,000 (business)?