Question

Jed, age 55, is married with no children. During 2018, Jed had the following income and expense items:

Three years ago, Jed loaned a friend $10,000 to help him purchase a new car. In June of the current year, Jed learned that his friend had been declared bankrupt and had left the country. There is no possibility that Jed will ever collect any of the $10,000.

In April of last year, Jed purchased some stock for $5,000. In March of the current year, the company was declared bankrupt, and Jed was notified that his shares of stock were worthless.

Several years ago, Jed purchased some § 1244 stock for $120,000. This year, he sold the stock for $30,000.

In July of this year, Jed sold some land that he had held for two years for $60,000. He had originally paid $42,000 for the land.

Jed received $40,000 of interest income from State of Minnesota bonds.

In September, Jed's home was damaged by an earthquake; Jed's county was declared a Federal disaster area by the President. Jed's basis in his home was $430,000. The value of the home immediately before the quake was $610,000. After the quake, the home was worth $540,000. Because earthquake damage was an exclusion on Jed's homeowner's insurance policy, he received no insurance recovery.

Jed received a salary of $80,000.

Jed paid home mortgage interest of $14,000.

If Jed files a joint return for 2018, determine his NOL for the year. If required, use the minus sign to indicate a loss.

To assist in determining Jed'a adjusted gross income, answer the following questions:

The loss from the sale of § 1244 stock results in an ordinary loss of $.

The worthless securities and sale of the land results in a net long-term capital gain of $.

After the netting process for all capital gains and losses, Jed has an overall net long-term capital gain of $.

After any limitations, Jed's personal casualty loss is $

Taxable income/loss $ The excess of nonbusiness deductions over the sum of nonbusiness income plus net nonbusiness capital gains $ Net operating loss $

Answer 1

Working notes:

1. income earned on bonds of state of minisota is tax exempt in nature so it is not included in salary income.

2. Gain on sale of stock = 120000 - 30000 = 90000

3. LTCG = 60000 - 42000 = 18000

4. Itemized deuctions = interest on mortagage home + causualty loss

                                          = 14000 + 69900 = 83900

causualty loss = (610000 - 540000) - 100 = 69900

5. Excess of non business deduction over Non business interest income and caualty loss

= $14000 - $3000 = $11000

6. Loan give to a friend became bankrupt is a personal loss so not included in taxable income.

Net operatin loss of Mr. Jed for year end 2018:

Particulars	Amount ($)	Amount ($)
Salary received by J		80,000
Add: Gain on sale of Stock (working note - 2)	90,000
Add: LTCG on land (Working note - 3)	18,000
Less: LTCL on securities	(5,000)
Less: STCL on non-business debts	(10,000)
Annual gross Income		(7,000)
Less: Total Itemized deuctions	(83,900)
Less: Personal Exemption (2*3,950)	(7,900)
Taxable income		(98,000)
Add: Personal Exemption	7,900
Add: Excess of non business deduction over Non business interest income and caualty loss (working note - 5)	11,000
Net Operating Loss		(79,900)