Archie Smith Works Full-Time as a Dentist and Is in a 50

question 4

Essay

Archie Smith works full-time as a dentist and is in a 50% tax bracket. He lives on an acreage where he began a part-time farming operation last year (20x1). During 20x1, Archie incurred farm expenses totaling $38,500 and he received $5,200 in farming revenue. Operations became more profitable this year, and in 20x2 Archie's farm revenues were $20,000 and expenses totaled $16,000.
Required:
a) Name the type of loss that Archie was able to recognize in 20x1? Briefly explain your answer.
b) Calculate the loss from farming operations that Archie was able to apply against his other sources of income in 20x1.
c) What effect will the 20x1 operations have on Archie's 20x2 and future year's taxable income? Show your calculations.

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Definitions:

Ambiguous Family

A term used to describe family structures that do not conform to traditional norms, often involving complex relationships and living arrangements.

Surrogate Motherhood

A form of assisted reproductive technology where a woman (surrogate mother) agrees to carry and give birth to a child for another person or couple who will become the child's parent(s) after birth.

Parthenogenesis

A form of asexual reproduction found in females where growth and development of embryos occur without fertilization by a male.

Artificial Insemination

A medical procedure that involves directly inserting sperm into a woman’s cervix or uterus to achieve pregnancy without sexual intercourse.