I've been studying all day, and I just can't get my head around this question, what are they trying so hard to explain in the explanation?:
Robin Moore, a self-employed taxpayer, reported the following information for 2018:
Income: Dividends from investments $ 500
Net short-term capital gain on sale of investment 1,000
Deductions: Net loss from business (6,000)
Standard deduction (12,000)
What is the amount of Moore's net operating loss for 2018?
Answer: $6,000
A NOL generally represents a loss from the conduct of a trade or business and can generally be carried forward indefinitely to offset income in the carryforward years. Since a NOL generally represents a business loss, an excess of nonbusiness deductions over nonbusiness income cannot be subtracted in computing the NOL. Nonbusiness deductions generally include itemized deductions as well as the standard deduction if the taxpayer does not itemize. In this case, the $12,000 standard deduction offsets the $1,500 of nonbusiness income received in the form of dividends and short-term capital gain, but the excess ($10,500) cannot be included in the NOL computation. Thus, the taxpayer's NOL simply consists of the $6,000 business loss. The taxable loss is ($16,500). When the excess standard deduction ($10,500) is added to the loss, that produces the NOL of ($6,000).
FAR - 78*
AUD - 66, 79
REG - 73, 76
BEC - 79
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