Question

Exercise 7-31 (Algorithmic) (LO. 7) Emily, who is single, sustains an NOL of $17,880 in 2020. The loss is carried forward to 2021. For 2021, Emily' income tax information before taking into account the 2020 NOL is as follows: Adjusted gross income $89,400 Itemized deductions*: Medical ($10,728 - (10% x $89,400)] $1,788 Taxes 13,410 Interest expense on home mortgage 26,820 (42,018) Taxable income $47,382 * The 2020 single standard deduction is $12,400; Emily's itemized deductions will exceed the 2021 single standard deduction (after adjustment for inflation). Assume that the medical expense AGI floor is 10% in 2021 (it was 7.5% for 2017 through 2020). How much of the NOL carryforward can Emily use in 2021, and what is her adjusted gross income and her taxable income? Emily may use $ of the NOL, resulting in adjusted gross income of $ and taxable income $

Answer 1

E may use $17,880 of the NOL, resulting in adjusted gross income of $71,520 and taxable income $31,124.

Adjusted Gross Income = Adjusted Gross Income before adjustment of net operating loss
= $89,400 - $17,880
= $71,520

Amount $71,520 145 Particulars 146 Adjusted Gross Income 147 Less: Itemized deductions 148 Medical expenses (10728-71520*10%) 149 Taxes (Upto $10,000) 150 Interest expense on home mortgage 151 Taxable Income $3,576 $10,000 $26,820 $31,124