Final answer:
Gertrude's adjusted gross income (AGI) is $175,000, which is calculated by considering her salary, gain on the sale of stock, loss on the sale of stock, nonbusiness bad debt, and business bad debt.
Step-by-step explanation:
To calculate Gertrude's adjusted gross income (AGI), we consider her various sources of income and deductions. Her salary of $230,000 is included in her AGI. Her gain on the sale of § 1244 stock, which is a type of small business stock, is also included, totaling $40,000. However, her loss on the sale of another § 1244 stock is subtracted from her AGI, which amounts to $60,000.
Next, her nonbusiness bad debt of $15,000 and business bad debt of $20,000 are also deducted from her AGI. These deductions are allowed for qualifying debt that has become worthless.
To determine Gertrude's AGI, we add her salary and gain on the sale of stock, and subtract her loss on the sale of stock, nonbusiness bad debt, and business bad debt:
AGI = Salary + Gain on sale of § 1244 stock - Loss on sale of § 1244 stock - Nonbusiness bad debt - Business bad debt
AGI = $230,000 + $40,000 - $60,000 - $15,000 - $20,000 = $175,000