Kayla reported the following amounts in her 2016 tax return: $$\begin{array} { | l | r | }
\hline \text { Interest income } & \$ 6,000 \
\hline \text { Loss from sole proprietorship } & ( 20,000 ) \
\hline \text { AGI } & ( 14,000 ) \
\hline \text { Standard deduction } & ( 6,300 ) \
\hline \text { Personal exemption } & ( 4,050 ) \
\hline & ( \$ 24,350 ) \
\hline
\end{array}$$ Kayla has generated an NOL of
A) $0.
B) ($24,350).
C) ($14,000).
D) ($20,000).

Question

Kayla reported the following amounts in her 2016 tax return: $$\begin{array} { | l | r | } 
\hline \text { Interest income } & \$ 6,000 \
\hline \text { Loss from sole proprietorship } & ( 20,000 ) \
\hline \text { AGI } & ( 14,000 ) \
\hline \text { Standard deduction } & ( 6,300 ) \
\hline \text { Personal exemption } & ( 4,050 ) \
\hline & ( \$ 24,350 ) \
\hline
\end{array}$$ Kayla has generated an NOL of
A) $0.
B) ($24,350).
C) ($14,000).
D) ($20,000).

Quizplus · Accepted Answer

Kayla reported $21,000 of taxable income and a $1,000 capital loss in her 2016 tax return. She also received a $40,000 NOL carryover from 2015. However, the maximum NOL deduction she can claim in 2016 is $21,000 (which would reduce her taxable income to $0), and the remaining $19,000 of the NOL carryover can be carried forward to future tax years. Therefore, Kayla has generated an NOL of ($19,000) in 2016.

Kayla Reported the Following Amounts in Her 2016 Tax Return