Question

Exercise 7-29 (LO. 6) Tim, a single taxpayer, operates a business as a single-member LLC. In 2018, his LLC reports business income of $225,000 and business deductions of $575,000, resulting in a loss of $350,000. What are the implications of this business loss? Tim has an excess business loss of $ . Can this business loss be used to offset other income that Tim reports? If so, how much? If not, what happens to the loss? Tim may use $ of the $350,000 LLC business loss, to offset . The excess business loss is .

Answer 1

From 2018, there is a threshold limit of $250,000 defined by IRS for single:

(a) Tim has an excess business loss:

= Business loss - Threshold

= $350,000 - $250,000

= $100,000

(b) Tim may use $250,000 of the $350,000 LLC business loss to offset non business income.

The excess business loss is treated as the portion of the Tim's NOL carry forward.

Excess business loss of $100,000 will be treated as the NOL carryforward to subsequent years.