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Taxation Problem (2018) Henri is a single, cash-basis, calendar-year taxpayer. His filing status is “single.” He...

Taxation Problem (2018)

Henri is a single, cash-basis, calendar-year taxpayer. His filing status is “single.” He owns and operates “La Kaffee,” a small, European-style coffee house, as a sole proprietorship. For 2018, Henri has the following amounts of income and deductions:

Gross revenue from operation of La Kaffee . . . . $75,000

Deductible expenses from operation of La Kaffee . . . $100,000

Capital gain on sale of business-use asset . . . . $3,000

Capital loss on sale of business-use asset . . . . ($20,000)

Gain on sale of corporate stock . . . . $18,000

Loss on sale of corporate bonds . . . . ($4,000)

Stock dividends received . . . . $6,000

Interest received on corporate bonds . . . . $3,000

Standard deduction . . . . $12,000

What is Henri’s net operating loss (NOL) for the year?

Please provide an explanation of you found the answer

Solutions

Expert Solution

Calculation Henri's of Net operating loss :

Loss From Capital gains :

1 ) Gain on sale of corporate stock - $ 18,000

Loss on sale of corporate bonds - ($4,000)

Net gain on sale of stock - $ 14,000

2 )   Capital gain on sale of business-use asset - $3,000

Capital loss on sale of business-use asset - ($20,000)

Net loss on sale of business use assets - $ ( 17,000 )

Net loss from Capital gains - $ ( 3,000 ) { loss from sale of business use assets can be set off with

gain from Sale of stock )

Loss From Operations :

  Gross revenue from operation of La Kaffee - $75,000

  Deductible expenses from operation of La Kaffee - $100,000

Net loss from operation - $ (25,000)

Income from Other sources ( Non operating income ) :

Stock dividends received - $6,000

  Interest received on corporate bonds - $3,000

Total Income - $ 9,000

Loss from House property ( Standard deduction ) - $ ( 12,000 )

Total Net operating loss for the C.Y : i.e After setting Other sources income with the loss from operations ( it is possible as per taxation laws )

= $ ( 3,000 ) + $ (25,000 ) + $ 9,000 + $ (12,000 )

= $ (31,000) Loss

ekkarill92 answered 1 year ago
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