Final answer:
Dan does not have any gross income related to his Amazon shares until he sells them. The increase in the stock's value is an unrealized gain, not gross income. Only after selling the shares at a profit, minus any fees, does he realize a capital gain which is considered gross income.
Step-by-step explanation:
Understanding Gross Income from Stocks
Dan purchased 100 shares of Amazon stock at $30 per share. The current price of the stock is $730 per share. It's important to note that the increase in value of the stocks does not constitute gross income until those shares are sold. The concept here is similar to capital gains, which are only realized when an asset is sold at a profit. Until Dan sells his shares, he only has an unrealized capital appreciation. On the other hand, if Dan were to sell his shares at the current market value, the difference between the selling price and the purchase price would be his capital gain and would represent his gross income from the investment, before taxes and any other fees associated with the sale.
If we look at other examples:
Someone buying 1000 shares of Nike at $24.50 and selling at $39.75 would result in a certain net profit after considering transaction fees.
Similarly, purchasing 800 shares of Panda Express at $13.50 and selling at $23.25 would also yield a net profit after deducting transaction costs.
In these examples, once the shares are sold, the difference between the purchase and selling prices, minus any trading fees, would be considered the net profit and part of the seller's gross income for tax purposes.