Question

In the current year, a taxpayer purchases 100 shares of x company stock for $3,000 and 100 shares of y company stock for $5,000. the taxpayer sells the 100 shares of x company stock for $4,500 in the current year. at the end of the year, the taxpayer still owns the y company stock which is now worth $7,000. what is the taxpayer's gross income for the current year?

Answer 1

Answer: The tax payer’s gross income is $1500.

In this question, only the realized gain on shares is considered as income. Realized gain refers to the gain one gets by actually selling the shares held.

Here, the tax payer bought and sold 100 shares of x company at $3,000 and $4500 respectively. So his realized gain is
`$1500 (4500-3000)`.

As for stock Y, we do not recognize the gain, as the taxpayer has not sold the shares even through it is worth more now than what he paid for.