Mary, a single taxpayer, whose AGI is $70,000 (before property transactions) had
ID: 2450855 • Letter: M
Question
Mary, a single taxpayer, whose AGI is $70,000 (before property transactions) had the following transactions:
Sold Verizon stock for $26,000 on 3/15/15, the stock was purchased on 11/12/14 for $20,000.
Sold CVS stock for $3,000 on 8/15/15, the stock was purchased 10/1/14 for $18,000.
Sold rare stamp collection for $13,000, 1/10/15, the collection was purchase in 2010 for $4,000.
Sold Exxon stock for $16,000 on 2/15/15, the stock was purchased in 2009 for $20,000.
Analyze the effects of capital gains and losses on the four property transactions and determine the TP’s AGI.
Explanation / Answer
Gain on Sale of Verizon stock is short term capital gain because it is sold with in an year. This capital gain will be treated as ordinary income.
CVS stocks were acquired more than on year. Hence capital gain are long term in nature. It is to be treated as Long term Capital gain for the purpose of tax.
Similar treatement is to be made for capital gain on rare stamp and Capital loss on Exxon stock and these loss or gain does not have effect on the AGI.
Therefore TP's AGI will be $70,000 + ($26,000-$20,000) = $76,000.