Nell, single and age 38, had the following income and expenseitems in

QUESTION

Nell, single and age 38, had the following income and expenseitems in 2008:Nonbusiness baddebt &n
1040 :Salary 40000interestincome 1000schdule c (baddebt) (2000)sch d** (1500):total income andAGI 37500 **sch D LT gain (4000*.28) 1120 baddebt 6000 STcapial loss 3000total STlosses 9000:netloss 7880: The loss on line 16or c ( $3,000), or if married filing separately, ($1,500) : so out of the 7880 net loss only 1500 is deductible this year the rest will have to be carried forward The distinction between a business bad debt and anonbusiness adj. 1. Unrelated to business or industry. 2. Unrelated to ones own business oremployment. .. Click the link for moreinformation. bad debt is important. A business bad debt is deductibleas an ordinary deduction inthe year incurred , while a nonbusiness bad debt is treatedas a

rm capitalloss. Thus, a business bad debt deduction can reduce ataxpayers trade or business income dollar for dollar and produce(or add to) a net operatinglossoperating loss Alternatively, a nonbusiness bad debt is of limited benefitbecause of the limitations on capital losses. The maximum amount ofa net short-term capital loss that an individual can deduct againstordinary income in any year is $3,000. In addition, no deduction isallowed for a partially worthless nonbusiness bad debt.

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