Question

Max, a single taxpayer, has a $270,000 loss from his sole proprietorship. How much of this...

Max, a single taxpayer, has a $270,000 loss from his sole proprietorship. How much of this loss is deductible after considering the excess business loss rules?

a. $270,000.

b. $255,000.

c. $15,000.

d. $0.

e. None of the choices are correct.

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Answer #1

The correct answer will be option (b) $255,000. It is because the non-deductible excess business loss is $15,000 (the taxpayer's aggregate business deductions ($270,000) over the sum of his business gross income, $255,000).An excess business loss is the amount by which the total deductions from all the trade or business are more than the gross income plus a threshold amount. For 2019 the threshold amount is $ 2,55,000.

The other options (a), (c) ,(d) and (e) are not correct because of the above reason.

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