Question

1. In 2018, Cindy is married and files a joint return. She operates a sole proprietorship in which she materially participates. Her proprietorship generates gross income of $225,000 and deductions of $525,000, resulting in a loss of $300,000. What is Cindy's excess business loss for the year?

a. $0

b. $30,000

c. $250,000

d. $280,000

e. None of the above.

2. In 2018, Theo, a single taxpayer operates a sole proprietorship in which mataerially participates. His proprietorship generates gross income of $320,000 and deductions of $600,000, resulting in a loss of $280,000. The large deductions are due to the acquision of equipment and the use of immediate expense and additional first year depreciation to deduct all of the acquisitions. What is Theo's excess business loss for the year?

a. $0

b. $30,000

c. $250,000

d. $280,000

e. None of the above.

Answer 1

1) Answer (A) 0

Calculation of Excess business loss for the year:

Particulars	Amount($)
Aggregate business deductions	525,000
Less: Aggregate business gross income	(225,000)
Less: Threshold amount	(500,000)
Excess Business loss	0

2) Answer (B) $30,000

Calculation of Excess business loss for the year:

Particulars	Amount($)
Aggregate business deductions	600,000
Less: Aggregate business gross income	(320,000)
Less: Threshold amount	(250,000)
Excess Business loss	30,000