Question

Jaden files a return as a single taxpayer. In 2020, he had the following items:

•Salary of $50,000.
•Loss of $55,000 on the sale of § 1244 stock acquired two years ago.
•Interest income of $8,000.
Jaden's AGI for 2020 is:_____

Answer 1

Jaden's Adjusted Gross Income (AGI) for 2020 is $8,000, after taking into account his salary, the deductible part of the loss on § 1244 stock, and his interest income.

Step-by-step explanation:

Jaden's Adjusted Gross Income (AGI) for 2020 can be determined by considering his salary, loss on the sale of § 1244 stock, and interest income. His salary amounts to $50,000, he incurred a loss of $55,000 from the sale of the stock, and he earned $8,000 in interest income. According to tax rules, a loss on § 1244 stock can be treated as an ordinary loss up to a certain limit ($50,000 for single filers), which can be deducted from his regular income. Therefore, we calculate his AGI as follows:

$50,000 (Salary) - $50,000 (Section 1244 loss deduction) + $8,000 (Interest Income) = $8,000 AGI.

If the loss on the sale of stock were not deductible, the income would just be the sum of salary and interest income. However, due to the special treatment of § 1244 stock, Jaden can reduce his taxable income significantly.