Tim, a single taxpayer, operates a business as a single-member LLC. In 2021, his LLC reports business income of $225,000 and business deductions of $587,000, resulting in a loss of $362,000. What are the implications of this business loss

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20-05-2022
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Tim, a single taxpayer, operates a business as a single-member LLC. In 2021, his LLC reports business income of $225,000 and business deductions of $587,000, resulting in a loss of $362,000. What are the implications of this business loss

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Tundexi Tundexi · Answer 1 · 2022-05-31T11:58:15+02:00

The implications of this business loss is that $162,000 will be treated as the NOL carryforward to subsequent years.

What is the threshold limit of single in 2021?

From 2021 IRS, there is a threshold limit of $200,000 as defined by IRS for single.

Tim has an excess business loss = Business loss - Threshold

= $362,000 - $200,000

= $162,000

Tim may use $200,000 of the $362,000 LLC business loss to offset non business income.

Since the excess business loss is treated as the portion of the Tim's NOL carry forward, then, the excess business loss of $162,000 will be treated as the NOL carryforward to subsequent years.