Assume that Wrigley Juice is owned by Calvin as a sole proprietorship. Explain the effect of Wrigley’s results on Calvin’s tax return.
Wrigley Juice has the following income, expense, and loss items for the current year:
Sales ............... $850,000
Tax-exempt interest .......... 40,000
Long-term capital gain ........ 85,000
Short-term capital loss ........ 35,000
Passive activity loss .......... 20,000
Cost of goods sold ......... 480,000
Depreciation ............. 40,000
Section 179 expense .......... 50,000
Other operating expenses ....... 200,000
Net operating loss (from preceding year) . 24,000