Question

Wallace, who is single, had the following items for the current year:

• Salary of $90,000.
• Gain of $30,000 on the sale of § stock acquired two years earlier.
• Loss of $75,000 on the sale of § 1244 stock acquired three years earlier.
• Worthless stock of $7,000. The stock was acquired on February 1 of the prior year and became worthless on January 15 of the current year.

Wallace's AGI for the current year would be:
a. $38,000.
b. $42,000.
c. $47,000.
d. $37,000.
e. None of these choices are correct.

Answer 1

Wallace's AGI for the current year would be $38,000.

Step-by-step explanation:

To calculate Wallace's AGI for the current year, we need to consider his salary, capital gains, and losses.

His salary of $90,000 would be included in his AGI.

Next, we calculate the capital gain from the sale of the stock acquired two years earlier. As there was a gain of $30,000, this amount would be added to his AGI.

Then, we calculate the capital loss from the sale of the § 1244 stock acquired three years earlier. As there was a loss of $75,000, this amount would be deducted from his AGI.

Finally, we consider the worthless stock of $7,000. As this stock became worthless during the current year, it would be deducted from his AGI.

Therefore, Wallace's AGI for the current year would be: $90,000 + $30,000 - $75,000 - $7,000 = $38,000.