Don Juan, a single taxpayer, is the sole owner of DJ's Inc., an S Corporation. This year, DJ's Inc. incurred a massive $600,000 business loss, all of which is allocable to Don Juan as the sole shareholder. Assume that the $600,000 loss is not limited by the basis, at-risk, or passive loss rules, and that Don Juan has no other business income or business losses. How much of the $600,000 loss will Don Juan be able to deduct this year? What happens to any loss not deducted this year?

Question

Yosef Hayes

Business

20 August, 14:28

Don Juan, a single taxpayer, is the sole owner of DJ's Inc., an S Corporation. This year, DJ's Inc. incurred a massive $600,000 business loss, all of which is allocable to Don Juan as the sole shareholder. Assume that the $600,000 loss is not limited by the basis, at-risk, or passive loss rules, and that Don Juan has no other business income or business losses. How much of the $600,000 loss will Don Juan be able to deduct this year? What happens to any loss not deducted this year?

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Jamar Sampson · Answer 1

Don Juan is sole business owner and his loss in excess to the minimum threshold amount is $250,000. So Don Juan may deduct the amount $350,000 in terms of loss.

If Don Juan does not deduct the loss this year, it would be carried forward to next fiscal statement

Explanation:

Part 1. The calculation is made as below

Excess of business loss ($600,000) - (other business income + Threshold amount ($250,000))

The minimum threshold amount is deductible from the Tax comes out to be $350,000

Part 2. The loss is reflected in next year's tax statement as net operating loss and can be carried forward. So if Don Juan miss the loss deduction claim, he can do it next year.