Question

Tim, a single taxpayer, operates a business as a single-member LLC. In 2019, his LLC reports business income of $225,000 and business deductions of $580,000, resulting in a loss of $355,000.

a. What are the implications of this business loss?
b. Can this business loss be used to offset other income that Tim reports? If so, how much? If not, what happens to the loss?

Answer 1

Excess loss business is a situation where deduction exceeds the total income, like given in the above situation.

As per IRS for 2019,

New limitation is $150,000 of the disallowed business loss would be carried forward to 2019 as an additional NOL .

Therefore,

1) Tim has excess business loss of $ 205000

($580000 - $ 225000- $150000)

2) Tim may use $150000 of the $355000.