Lettuca Inc. generated a $77,050 ordinary loss from operations this year. It also recognized $5,920 recaptured ordinary income, $55,000 net Section 1231 loss, and $7,840 net capital loss on the sale of assets. Compute Lettuca's net operating loss.
A) ($77,050)
B) ($126,130)
C) ($132,050)
D) ($133,970)

Question

Quizplus · Accepted Answer

The net operating loss is calculated by combining the ordinary loss from operations with the net Section 1231 loss and the recaptured ordinary income. The net capital loss is not included in the net operating loss calculation. Thus, the net operating loss is $77,050 + $55,000 - $5,920 = $126,130.