Question

-In 2018, Cindy is married and files a joint return. She operates a sole proprietorship in which she materially participates. Her proprietorship generates a gross income of $225,000 and deductions of $525,000, resulting in a loss of $300,000. What is Cindy’s excess business loss for the year? a. $-0-.b. $30,000.c. $250,000.d. $280,000.e. None of the above.

-In 2018, Theo, a single taxpayer operates a sole proprietorship in which materially participates. His proprietorship generates a gross income of $320,000 and deductions of $600,000, resulting in a loss of $280,000. The large deductions are due to the acquisition of equipment and the use of immediate expense and additional first-year depreciation to deduct all of the acquisitions. What is Theo’s excess business loss for the year? a. $-0-. b. $30,000. c. $250,000. d. $280,000 e. None of the above

-During the year, Sophie (a self-employed marketing consultant) went from Omaha to Lima (Peru) on business. She spent four days on business, two days on travel, and four days on vacation. Disregarding the vacation costs, Sophie’s expenses are: Airfare $3,000 Lodging 800 Meals 600 Entertainment 400 Sophie’s deductible expenses are: a. $4,300. b. $2,900. c. $2,800. d. $2,500

Answer 1

1. answer is option E. None of the above

Aggregate business deductions                                              $525,000

            Less:    Aggregate business gross income and gains                           (225,000)

            Less:    Threshold amount                                                                   (250,000)

                                    Excess business loss                                                   $50000

2. answer is option A $0

Aggregate business deductions                                              $600,000

            Less:    Aggregate business gross income and gains                           (320,000)

            Less:    Threshold amount                                                                   (500,000)

                                    Excess business loss                                                   $ 0

3. Answer is option E. None of the above

$1,800 [60% (6 days business/10 day trip) ×$3,000 (air fare)] + $800 + $500 [50%* ($600 + $400)] = $3,100.