Question

In: Accounting

Bruce, who is single, had the following items for the current year: Salary of $85,000. Loss...

Bruce, who is single, had the following items for the current year:

Salary of $85,000.

Loss of $75,000 on the sale of § 1244 stock acquired three years earlier.

​Determine Bruce’s AGI for the current year.

$27,000

$10,000

$85,000

$32,000

Solutions

Expert Solution

Per IRS, loss on sale of Section 1244 stock is treated as a Capital Loss . Section 1244 of the Internal revenue code allows to deduct loss of stock as ordinary loss as against the capital loss, which is limited to $3,000 annually. Since Bruce does not have any capital gains during the year, the excess of $3,000 of capital loss is carried forward to the subsequent years.

Further, Bruce can deduct an additional $50,000 of the losses on sale of stock as ordinary loss during the year in accordance with the provisions of Section 1244.

The total deduction of losses to arrive at the AGI for Bruce is $50,000 + $3,000 = $53,000.

Bruce's AGI for the current year = $85,000 - $53,000 = $32,000

Based on the calculation above, the correct answer is Option D - $32,000.

Option A is incorrect per the above calculation.

Option B is incorrect as Bruce cannot deduct the entire loss of $75,000 from this salary income.

Option C is incorrect as $85,000 is the salary income earned by Bruce. However, this income has to be adjusted by the loss of sale on section 1244 stock for the current year.

Please let me know if you have any questions via comments and all the best :) !

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

During the current year, Pablo, a nurse who is single, has $95,000 of salary, $30,000 of...
During the current year, Pablo, a nurse who is single, has $95,000 of salary, $30,000 of income from dividends, and a $27,000 loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is $110,000. Of the $27,000 loss, how much is deductible in the current year? a.    $20,000 b.    $22,500 c.    $24,500 d.    $25,000 e.    $27,000
Brian had the following items of income this year. Salary - $22,000 Child support received -...
Brian had the following items of income this year. Salary - $22,000 Child support received - $6,000 Alimony received (divorce finalized June 1, 2017)- $10,000 Rent income of $2,000 and Royalty income of $3,000 Calculate Brian's gross income for the current year. Group of answer choices a. $27,000 d. $43,000 b. $34,000 c. $37,000
B is single and reports the following items of income and deductions for the current year:...
B is single and reports the following items of income and deductions for the current year: Salary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000 Net long-term capital gain on sale of investment property. . . . . ....
The company FPA has the following income, expense, and loss items for the current year. Sales...
The company FPA has the following income, expense, and loss items for the current year. Sales $850,000 Tax-exempt interest $40,000 Long-term capital gain $85,000 Short-term capital loss $35,000 Passive activity loss $20,000 Cost of goods sold $480,000 Depreciation $40,000 Section 179 expense $50,000 Other operating expenses $200,000 Net operating loss (from previous year) $24,000 Prepare a calculation of taxable income for the following scenarios and indicate the tax form(s) to report the business activity: Partnership equally owned by Vinnie and...
The company FPA has the following income, expense, and loss items for the current year: Sales...
The company FPA has the following income, expense, and loss items for the current year: Sales $850,000 Tax-exempt interest $40,000 Long-term capital gain $85,000 Short-term capital loss $35,000 Passive activity loss $20,000 Cost of goods sold $480,000 Depreciation $40,000 Section 179 expense $50,000 Other operating expenses $200,000 Net operating loss (from previous year) $24,000 Prepare a calculation of taxable income for the following scenarios and indicate the tax form(s) to report the business activity: Sole proprietorship Partnership equally owned by...
The company FPA has the following income, expense, and loss items for the current year. Sales...
The company FPA has the following income, expense, and loss items for the current year. Sales $850,000 Tax-exempt interest $40,000 Long-term capital gain $85,000 Short-term capital loss $35,000 Passive activity loss $20,000 Cost of goods sold $480,000 Depreciation $40,000 Section 179 expense $50,000 Other operating expenses $200,000 Net operating loss (from previous year) $24,000 Prepare a calculation of taxable income for the following scenarios and indicate the tax form(s) to report the business activity:  Sole proprietorship  Partnership equally...
Instructions The company FPA has the following income, expense, and loss items for the current year:...
Instructions The company FPA has the following income, expense, and loss items for the current year: Sales $850,000 Tax-exempt interest $40,000 Long-term capital gain $85,000 Short-term capital loss $35,000 Passive activity loss $20,000 Cost of goods sold $480,000 Depreciation $40,000 Section 179 expense $50,000 Other operating expenses $200,000 Net operating loss (from previous year) $24,000 Prepare a calculation of taxable income for the following scenarios and indicate the tax form(s) to report the business activity: Sole proprietorship Partnership equally owned...
During the current year, Donna, a single taxpayer (divorced in 2019), reports the following items of...
During the current year, Donna, a single taxpayer (divorced in 2019), reports the following items of income and expenses: Income: Salary $86,000 Municipal bond interest 1,300 Bank account interest 2,300 Alimony received 24,000 Capital gain on an asset held less than one year 3,000 Rental income from residential rental house 12,500 Expenses/losses: Interest on principal residence 8,000 Real estate taxes on principal residence 1,000 Capital loss on an asset held less than one year 7,000 Expenses related to rental property...
During the current year, Donna, a single taxpayer (divorced in 2019), reports the following items of...
During the current year, Donna, a single taxpayer (divorced in 2019), reports the following items of income and expenses: Income:       Salary                                                                         $86,000       Municipal bond interest                                                1,300       Bank account interest                                                    2,300       Alimony received                                                        24,000       Capital gain on an asset held less than one year           3,000       Rental income from residential rental house              12,500 Expenses/losses:       Interest on principal residence                                      8,000       Real estate taxes on principal residence                       1,000       Capital loss on an asset held less...
Seiko’s current salary is $85,000. Her marginal tax rate is 32 percent and she fancies European...
Seiko’s current salary is $85,000. Her marginal tax rate is 32 percent and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for Idaho Office Supply. Her friend, knowing of her interest in sports cars, tells her about a manager position at the local BMW and Porsche dealer. The new position pays only $75,000 per year, but it allows employees to purchase one new car per year at a discount of $15,000....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT