LO.7 Robert and Susan Reid had an NOL of $30,000 in 2012. They had no taxable income for 2010 and $14,850 of taxable income for 2011 computed as follows:

Salary $ 50,000 Capital loss (4,000)

Adjusted gross income $ 46,000 Less: Itemized deductions Charitable contributions of $24,000, limited to 50% of AGI $23,000 Medical expenses of $4,200, limited to the amount in excess of 7.5% of AGI

($4,200 − $3,450) 750 Total itemized deductions (23,750)

Exemptions (2 × $3,700) (7,400)

Taxable income $ 14,850 Write a letter to Robert and Susan informing them of the amount of the remaining NOL to be carried forward if the loss is applied against the 2011 taxable income. Also prepare a memo for the tax files. Their address is 201 Jerdone Avenue, Conway, SC 29526.