During the year, Karen, a single taxpayer, reports the following income and expe
ID: 2443429 • Letter: D
Question
During the year, Karen, a single taxpayer, reports the followingincome and expense items relating to her interior design business:
Revenues $52,000
Cost of goods sold 41,000
Advertising 3,300
Office supplies 1,700
Rent 13,800
Contract labor 28,000
Karen also worked part-time during the year, earning $13,500. She reports a long-term
capital gain of $4,200, and a short-term capital loss of $3,800. Her itemized deductions
total $5,200.
a. What is Karen’s taxable income or loss for the year?
b. What is Karen’s NOL for the year?
Explanation / Answer
revenues $52,000 cost of goodssold $41,000 $11,000 Advertisement expenses 3,300 office supplies 1,700 Rent 13,800 Contact labor expenses 28,000 total expenses $46,800 Net loss $35,800 a. computation of taxable income salary from parttime $13,500 loss from interior business ($35,800) Income from capital gains $4,200 Karen taxable income ($18,100) b. revenues $52,000 cost of goodssold $41,000 $11,000 Advertisement expenses 3,300 office supplies 1,700 Rent 13,800 Contact labor expenses 28,000 total expenses $46,800 Net loss $35,800
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