On 12/31/X4, Zoom, LLC, reported a $60,000 loss on its books. The items included in the loss computation were $30,000 in sales revenue, $15,000 in qualified dividends, $22,000 in cost of goods sold, $50,000in charitable contributions, $20,000 in employee wages, and $13,000 of rent expense. How much ordinary business income (loss)will Zoom report on its X4 return?
A)($8,000)
B)($25,000)
C)($60,000)
D)($95,000)

Question

Quizplus · Accepted Answer

To determine Zoom's ordinary business income (loss), we need to start with the $60,000 loss reported on its books and make adjustments for any non-business income and expenses.

First, we need to subtract the $15,000 in qualified dividends, which are considered passive income and not part of the ordinary business income calculation.

Next, we need to add back the $50,000 in charitable contributions, as these are considered a business expense and not part of the ordinary business income calculation.

Finally, we add back the cost of goods sold ($22,000), employee wages ($20,000), and rent expense ($13,000), which are all ordinary and necessary business expenses.

$60,000 (reported loss on books) 
- $15,000 (qualified dividends) 
+ $50,000 (charitable contributions) 
+ $22,000 (cost of goods sold) 
+ $20,000 (employee wages) 
+ $13,000 (rent expense) 
= ($8,000)

Therefore, the answer is (B) ($8,000) which represents the ordinary business income (loss) that Zoom will report on its X4 return.

On 12/31/X4, Zoom, LLC, Reported a $60,000 Loss on Its