Problem 7-43 (LO. 1, 4) Nell, single and age 38, had the following income and ex
ID: 2553879 • Letter: P
Question
Problem 7-43 (LO. 1, 4)
Nell, single and age 38, had the following income and expense items in 2017:
Determine Nell's AGI for 2017. (Hint: What happens with each element of personal casualty gains and losses when gains exceed losses?)
Nonbusiness bad debt $6,000 Business bad debt 2,000 Nonbusiness long-term capital gain 4,000 Nonbusiness short-term capital loss 3,000 Salary 50,000 Interest income 3,000 Personal casualty gain on an asset held for four months 10,000 Personal casualty loss on an asset held for two years 1,000 Assume all casualty losses are after the application of the $100-per-event floor.Explanation / Answer
Determination of Nell's AGI for 2017
Salary $50,000
Interest income 3,000
Business bad debt (2,000)
Non-business bad debt ($ 6,000)
Short-term capital loss (3,000)
Total short-term capital loss ($ 9,000)
Short-term capital gain* 10,000
Net short-term capital gain 1,000
Long-term capital gain $ 4,000
Long-term capital loss* (1,000)
Net long-term capital gain 3,000
Adjusted gross income $55,000
*Personal casualty gains exceed personal casualty losses ($10,000 ? $1,000 = $9,000); therefore, all personal casualty items are treated as capital gains and losses