Kevin received stock as a gift from his uncle. The stock was worth $4,820 as of the date of the gift and his uncle had paid $2,390 for it several years ago. If Kevin sells the stock for $5,800, what is his taxable income from the sale? Income $ 4,820
Kevin received stock as a gift from his uncle. The stock was worth $4,820 as of the date of the gift and his uncle had paid $2,390 for it several years ago. If Kevin sells the stock for $5,800, what is his taxable income from the sale? Income $ 4,820
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**Problem Statement:**
Kevin received stock as a gift from his uncle. The stock was worth $4,820 as of the date of the gift, and his uncle had paid $2,390 for it several years ago. If Kevin sells the stock for $5,800, what is his taxable income from the sale?
**Income Calculation:**
\[
\text{Income} \quad \$ \boxed{4,820}
\]
**Explanation:**
This educational example discusses how to determine the taxable income when selling gifted stock. Kevin's uncle originally purchased the stock for $2,390. At the time the stock was gifted to Kevin, its value was $4,820.
When Kevin sells the stock for $5,800, the taxable income is based on the increase in value from the original purchase price by the uncle ($2,390) to the selling price ($5,800).
To calculate the taxable income, use the formula:
\[ \text{Taxable Income} = \text{Selling Price} - \text{Original Purchase Price} \]
\[ \text{Taxable Income} = 5,800 - 2,390 = 3,410 \]
\[ \text{Taxable Income} = \$3,410 \]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5d9c9f6a-3a92-4650-aee4-d1b63ade92c4%2F47c24fbd-f56b-48a6-aec5-9ae2f64b4fea%2Fjy2mokj_processed.png&w=3840&q=75)
Transcribed Image Text:**Problem Statement:**
Kevin received stock as a gift from his uncle. The stock was worth $4,820 as of the date of the gift, and his uncle had paid $2,390 for it several years ago. If Kevin sells the stock for $5,800, what is his taxable income from the sale?
**Income Calculation:**
\[
\text{Income} \quad \$ \boxed{4,820}
\]
**Explanation:**
This educational example discusses how to determine the taxable income when selling gifted stock. Kevin's uncle originally purchased the stock for $2,390. At the time the stock was gifted to Kevin, its value was $4,820.
When Kevin sells the stock for $5,800, the taxable income is based on the increase in value from the original purchase price by the uncle ($2,390) to the selling price ($5,800).
To calculate the taxable income, use the formula:
\[ \text{Taxable Income} = \text{Selling Price} - \text{Original Purchase Price} \]
\[ \text{Taxable Income} = 5,800 - 2,390 = 3,410 \]
\[ \text{Taxable Income} = \$3,410 \]
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