Problem 7-44 (LO. 7) Xinran, who is married and files a joint return, owns a grocery store. In 2021, his gross sales were $276,000, and his operating expenses were $320,000. Other items on his 2021 return were as follows: $20,000 Nonbusiness capital gains (short-term) Nonbusiness capital losses (long-term) 9,000 Itemized deductions 18,000 Ordinary nonbusiness income 8,000 Salary from part-time job 10,000 In 2022, Xinran provides the following information: Net business income $60,000 Salary (spouse) 25,000 Interest income 2,000 Adjusted gross income $87,000 Less: Itemized deductions* $35,000 Charitable contributions (cash) Medical expenses of $6,925 [limited to the amount in excess of 7.5% of AGI ($6,925 - $6,525)] 400 Total itemized deductions $35,400 * The 2021 married filing jointly standard deduction is $25,100; Xinran's itemized deductions will exceed the 2022 standard deduction (after adjustment for inflation). Enter all amounts as positive numbers. However, use the minus sign to indicate a loss. If an amount is zero, enter "0". a. Compute Xinran's taxable income (or loss) for 2021? 2021 Net business income/loss from grocery store -44,000 Salary 10,000 Ordinary nonbusiness income 8,000 Net short-term capital gain 11,000 Adjusted gross income/loss -15,000 Less: MF) standard deduction 25,100 Less: Deduction for qualified business income Loss -40,100 b. Compute Xinran's NOL for 2021. -40,100 x Feedback Check My Work Incorrect c. Determine Xinran's taxable income for 2022. 2022 (1) Determine taxable income before application of the NOL: Net business income 60,000 Salary 25,000 Interest income 2,000 Adjusted gross income 87,000 Less: Itemized deductions: 35,400 Less: Deduction for qualified business income: Grocery store 4,400 x Taxable income Less: Deduction for qualified business income: Grocery store 4,400 Taxable income (2) Determine the NOL deduction: 1. The NOL carryforward $ 39,000 X, or 2. 80% of taxable income computed in step 1: $ 31,680 x (3) Determine final taxable income: Net business income $ 60,000 Salary 25,000 Interest income 2,000 NOL deduction 87,000 x Adjusted gross income $ 55,320 x Less: Itemized deductions Charitable contributions 35,000 x 2. 80% of taxable income computed in step 1: $ 31,680 X (3) Determine final taxable income: Net business income 60,000 Salary 25,000 Interest income 2,000 NOL deduction 87,000 x Adjusted gross income 55,320 x Less: Itemized deductions Charitable contributions 35,000 x Medical expenses 400 35,400 x Less: Deduction for qualified business income: Grocery store 12,000 x Taxable income 92,880 x Problem 7-44 (LO. 7) Xinran, who is married and files a joint return, owns a grocery store. In 2021, his gross sales were $276,000, and his operating expenses were $320,000. Other items on his 2021 return were as follows: $20,000 Nonbusiness capital gains (short-term) Nonbusiness capital losses (long-term) 9,000 Itemized deductions 18,000 Ordinary nonbusiness income 8,000 Salary from part-time job 10,000 In 2022, Xinran provides the following information: Net business income $60,000 Salary (spouse) 25,000 Interest income 2,000 Adjusted gross income $87,000 Less: Itemized deductions* $35,000 Charitable contributions (cash) Medical expenses of $6,925 [limited to the amount in excess of 7.5% of AGI ($6,925 - $6,525)] 400 Total itemized deductions $35,400 * The 2021 married filing jointly standard deduction is $25,100; Xinran's itemized deductions will exceed the 2022 standard deduction (after adjustment for inflation). Enter all amounts as positive numbers. However, use the minus sign to indicate a loss. If an amount is zero, enter "0". a. Compute Xinran's taxable income (or loss) for 2021? 2021 Net business income/loss from grocery store -44,000 Salary 10,000 Ordinary nonbusiness income 8,000 Net short-term capital gain 11,000 Adjusted gross income/loss -15,000 Less: MF) standard deduction 25,100 Less: Deduction for qualified business income Loss -40,100 b. Compute Xinran's NOL for 2021. -40,100 x Feedback Check My Work Incorrect c. Determine Xinran's taxable income for 2022. 2022 (1) Determine taxable income before application of the NOL: Net business income 60,000 Salary 25,000 Interest income 2,000 Adjusted gross income 87,000 Less: Itemized deductions: 35,400 Less: Deduction for qualified business income: Grocery store 4,400 x Taxable income Less: Deduction for qualified business income: Grocery store 4,400 Taxable income (2) Determine the NOL deduction: 1. The NOL carryforward $ 39,000 X, or 2. 80% of taxable income computed in step 1: $ 31,680 x (3) Determine final taxable income: Net business income $ 60,000 Salary 25,000 Interest income 2,000 NOL deduction 87,000 x Adjusted gross income $ 55,320 x Less: Itemized deductions Charitable contributions 35,000 x 2. 80% of taxable income computed in step 1: $ 31,680 X (3) Determine final taxable income: Net business income 60,000 Salary 25,000 Interest income 2,000 NOL deduction 87,000 x Adjusted gross income 55,320 x Less: Itemized deductions Charitable contributions 35,000 x Medical expenses 400 35,400 x Less: Deduction for qualified business income: Grocery store 12,000 x Taxable income 92,880 x