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:

Decision Polarization

The phenomenon where a group's decisions become more extreme than the individual members' initial positions, often after a discussion or deliberation process.

Deindividuation

A psychological state in which an individual loses self-awareness and self-restraint, often in group settings.

Social Compliance

The act of adhering to the rules, standards, or laws of society or a specific group, often to fit in or be accepted by the group.

Identity Transfer

A psychological phenomenon where individuals adopt the characteristics, values, or beliefs of another person or group as their own.