LO.7 Gus, who is married and files a joint return, owns a grocery store. In 2012, his

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LO.7 Gus, who is married and files a joint return, owns a grocery store. In 2012, his gross sales were $276,000, and operating expenses were $320,000. Other items on his 2012 return were as follows:

Nonbusiness capital gains (short term) $20,000 Nonbusiness capital losses (long term) 9,000 Itemized deductions (no casualty or theft) 18,000 Ordinary nonbusiness income 8,000 Salary from part-time job 10,000 During 2010, Gus had no taxable income. In 2011, Gus had taxable income of $21,700 computed as follows:
Net business income $ 60,000 Interest income 2,000 Adjusted gross income $ 62,000 Less: Itemized deductions Charitable contributions of $40,000, limited to 50% of AGI $31,000 Medical expenses of $6,550, limited to the amount in excess of 7.5% of AGI ($6,550 − $4,650) 1,900 Total itemized deductions (32,900)
Exemptions (2 × $3,700) (7,400)
Taxable income $ 21,700

a. What is Gus’s 2012 NOL?

b. Determine Gus’s recomputed taxable income for 2011.

c. Determine the amount of Gus’s 2012 NOL to be carried forward to 2013.

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