Final answer:
Max can deduct $262,000 of his $280,000 business loss against other income. The non-deductible amount, under the excess business loss rules for a single filer, is $18,000, which can be carried forward to future tax years. Option 4 is correct.
Step-by-step explanation:
The question pertains to excess business losses and their deductibility under current tax laws. For tax years beginning after December 31, 2020, and before January 1, 2027, the excess business loss limitation rules were reinstated by the Consolidated Appropriations Act, 2021.
These rules set limits on the amount of business losses that a non-corporate taxpayer, such as an individual, can use to offset other types of income (like salary or investment income) in a tax year.
As of 2021, these limits are $262,000 for single filers and $524,000 for married filers filing jointly, with inflation adjustments for subsequent years. Since the problem does not specify an adjustment for inflation, we will assume the 2021 amounts apply.
Thus, if Max has a business loss of $280,000 in 2022, and he is a single taxpayer, he can deduct losses up to $262,000 against other kinds of income for that year. The portion of the loss that exceeds this threshold ($280,000 - $262,000) would be $18,000 that is not deductible in the current tax year, but may be carried forward subject to future tax rules.