Final answer:
An excess business loss refers to when the total deductions for a business exceed the total income or gains from that business. It can be used to offset other income in the current year or carried forward to offset future taxable income.
Step-by-step explanation:
An excess business loss refers to the amount by which the total deductions for a business exceed the total income or gains from that business.
For example, if Harry's business has $100,000 in deductions but only $60,000 in income or gains, he would have a $40,000 excess business loss.
Excess business losses can be used to offset other income in the current year or carried forward to offset future taxable income.