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Tim, a single taxpayer, operates a business as a single-memberLLC. In 2019, his LLC reports...

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?

Tim has an excess business loss of $X.XX


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?

Tim may use $X.XX of the $355,000 LLC business loss, to offset nonbusiness income. The excess business loss is treated as part of Tim's NOL carryforward.

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Answer #1

Answer :

From 2019 there is a threshold limit of $255,000 defined by IRS for single


(a). Tim has an excess business loss of $100,000

Working :

Business loss355,000
Less: Threshold255,000
Excess Business loss100,000

(b). Tim may use $255,000 of the $355,000 LLC business loss, to offset non-business income

The excess business loss is treated as part of Tim's NOL carry forward


Note: Excess business loss of $100,000 will be treated as NOL carry forward to subsequent years.


Love the way you broke it down and explained the numbers. It certainly helped! Just a note for everyone, the threshold limit changes every year. I believe it's $262,000 for 2021. This will not affect this problem above, but it will if you have similar problems in different years!
Denise Raub
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