Abby, a single taxpayer, purchased 10,000 shares of § 1244 stock several years ago at a cost of $20 per share. In November of the current year, Abby received an offer to sell the stock for $12 per share. She has the option of either selling all of the stock now or selling half of the stock now and half of the stock in January of next year. Abby will receive a salary of $80,000 for the current year and $90,000 next year. Abby will have long-term capital gains of $8,000 for the current year and $10,000 next year.If Abby's goal is to minimize her AGI for the two years, determine whether she should sell all of her stock this year or half of her stock this year and half next year.a. Determine Abby's total AGI under both options for the current year and next year.If an amount is zero, enter "0". ### Sell all of the stock this year:#### Current Year's AGI- **Salary**: $80,000- **Ordinary Loss**: $50,000 (Checked, Correct)**Long-term capital gain**: $8,000- **Less: long-term capital loss**: - Deducted: $30,000 (Checked, Correct)- **Equals: net long-term capital loss**: - Amount: $22,000 (Checked, Correct)- **Deductible net long-term capital loss**: - Amount: $3,000 (Checked, Correct)**Adjusted gross income (AGI)**- **Net long-term capital loss carryover**: - Blank (X, Incorrect)#### Next Year's AGI- **Salary**: $90,000**Long-term capital gain**: $10,000- **Less: net long-term capital loss carryover**: - Amount: $19,000 (Checked, Correct)- **Equals: net long-term capital gain**: - Blank (X, Incorrect)- **Deductible net long-term capital loss**: - Blank**Adjusted gross income (AGI)**### Total AGI- **Current Year**: Blank- **Next Year**: Blank- **Total**: BlankThis diagram provides a systematic breakdown of capital gains and losses over a two-year period, detailing how various deductions and carryovers affect the adjusted gross income. ### Stock Sale and Adjusted Gross Income Calculation#### Sell half of the stock this year and half next year:---#### Current Year's AGI- **Salary:** $80,000- **Long-term capital gain:** $8,000 - **Less:** No capital loss ➜ $____________ - **Equals:** Net long-term capital gain ➜ $____________ - **Taxable net long-term capital gain:** ➜ $____________ - **Adjusted Gross Income:** ➜ $____________ ---#### Next Year's AGI- **Salary:** $90,000- **Long-term capital gain:** $10,000 - **Less:** No capital loss ➜ $____________ - **Taxable net long-term capital gain:** ➜ $____________ - **Adjusted Gross Income:** ➜ $____________ ---#### Total AGI- **Current year:** ➜ $____________ - **Next year:** ➜ $____________ - **Total:** ➜ $____________ ---This form is structured to assist in calculating adjusted gross income (AGI) over a two-year period, considering salary and long-term capital gains. It requires input of any capital losses to determine net and taxable gains, leading to the AGI for each year, and consequently, the total AGI across the two years.

AGI the Adjusted Gross Income can be defined as the result of the deduction of specific deductions…

Answered: Determine Abby's total AGI under both…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Abby, a single taxpayer, purchased 10,000 shares of § 1244 stock several years ago at a cost of $20 per share. In November of the current year, Abby received an offer to sell the stock for $12 per share. She has the option of either selling all of the stock now or selling half of the stock now and half of the stock in January of next year. Abby will receive a salary of $80,000 for the current year and $90,000 next year. Abby will have long-term capital gains of $8,000 for the current year and $10,000 next year.

If Abby's goal is to minimize her AGI for the two years, determine whether she should sell all of her stock this year or half of her stock this year and half next year.

a. Determine Abby's total AGI under both options for the current year and next year.

If an amount is zero, enter "0".

### Sell all of the stock this year:

#### Current Year's AGI
- **Salary**: $80,000
- **Ordinary Loss**: $50,000 (Checked, Correct)

**Long-term capital gain**: $8,000

- **Less: long-term capital loss**:
- Deducted: $30,000 (Checked, Correct)
- **Equals: net long-term capital loss**:
- Amount: $22,000 (Checked, Correct)
- **Deductible net long-term capital loss**:
- Amount: $3,000 (Checked, Correct)

**Adjusted gross income (AGI)**
- **Net long-term capital loss carryover**:
- Blank (X, Incorrect)

#### Next Year's AGI
- **Salary**: $90,000

**Long-term capital gain**: $10,000

- **Less: net long-term capital loss carryover**:
- Amount: $19,000 (Checked, Correct)
- **Equals: net long-term capital gain**:
- Blank (X, Incorrect)
- **Deductible net long-term capital loss**:
- Blank

**Adjusted gross income (AGI)**

### Total AGI
- **Current Year**: Blank
- **Next Year**: Blank
- **Total**: Blank

This diagram provides a systematic breakdown of capital gains and losses over a two-year period, detailing how various deductions and carryovers affect the adjusted gross income.

### Stock Sale and Adjusted Gross Income Calculation

#### Sell half of the stock this year and half next year:

---

#### Current Year's AGI

- **Salary:** $80,000
- **Long-term capital gain:** $8,000
- **Less:** No capital loss ➜ $____________
- **Equals:** Net long-term capital gain ➜ $____________
- **Taxable net long-term capital gain:** ➜ $____________

- **Adjusted Gross Income:** ➜ $____________

---

#### Next Year's AGI

- **Salary:** $90,000
- **Long-term capital gain:** $10,000
- **Less:** No capital loss ➜ $____________
- **Taxable net long-term capital gain:** ➜ $____________

- **Adjusted Gross Income:** ➜ $____________

---

#### Total AGI

- **Current year:** ➜ $____________
- **Next year:** ➜ $____________
- **Total:** ➜ $____________

---

This form is structured to assist in calculating adjusted gross income (AGI) over a two-year period, considering salary and long-term capital gains. It requires input of any capital losses to determine net and taxable gains, leading to the AGI for each year, and consequently, the total AGI across the two years.

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