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Megan operates a business and is taxed as a sole proprietor. For the year, the business...

Megan operates a business and is taxed as a sole proprietor. For the year, the business reports revenue and expenses of $325,000 and $684,000, respectively. Assuming that Megan has enough other income to offset the entire business loss, what is Megan’s net operating loss (NOL) for the year?

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Answer #1

Net operating loss (NOL): $0

Explanation: In case of sole proprietorship, the net operating loss can be deducted from the total income from other business or source like salary, wages or other earnings. In the current case, Megan has the operating loss of $359,000 ($684,000 - $325,000) and she has enough income to offset her entire business loss. Therefore, the net operating loss for the year will be $0 as the losses are offset with other income.

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