Question

Harold and Rosemary, married with three dependent children, operate an art gallery and store as a proprietorship. Their tax information for 2019 is as follows:

• Gross income from sales in business................................ $175,000
• Business operating expenses............................................. 250,000
• Interest income from investments.......................................... 6,000
• Mortgage interest expense on residence................................. 9,000
• Property taxes on residence.................................................. 6,500
• Long-term capital gain (nonbusiness).................................... 3,000
• Long-term capital loss (nonbusiness).................................. (5,500)

        Compute the couple’s taxable loss and their net operating loss for 2019 based on the information
        above and show all of your computations.

Answer 1

Calculation of taxable loss and NOL

Business Income
Gross sale	$    175,000
Business operating expense	$ (250,000)
	$     (75,000)
NOL carryovers	$      75,000	$                                 -
Interest Income from investment		$                          6,000
Capital gain
Long term capital gain	$         3,000
Long term capital loss	$       (5,500)	$                        (2,500)
Gross Income		$                          3,500
Less Standard Deductions		-24400
Taxable Income / loss		$                                 -

Therefore taxable loss = $0

and NOL = $75,000

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