Problem 7-36 (LO. 2, 8)

Abby, a single taxpayer, purchased 10,000 shares of 1244 stock several years ago at a cost of $20 per share. In November of the current year, Abby received an offer to sell the stock for $12 per share. She has the option of either selling all of the stock now or selling half of the stock now and half of the stock in January of next year. Abby will receive a salary of $80,000 for the current year and $90,000 next year. Abby will have long-term capital gains of $8,000 for the current year and $10,000 next year.

If Abby's goal is to minimize her AGI for the two years, determine whether she should sell all of her stock this year or half of her stock this year and half next year.

a. Determine Abby's total AGI under both options for the current year and next year.

If an amount is zero, enter "0".

Sell all of the stock this year:
Current year's AGI
Salary
Ordinary incomeOrdinary lossOrdinary loss
Long-term capital gain
Less: long-term capital lossshort-term capital losslong-term capital loss
Equals: net long-term capital gainnet long-term capital lossnet short-term capital gainnet short-term capital lossnet long-term capital loss
Deductible net long-term capital lossDeductible net short-term capital lossDeductible net long-term capital loss
Adjusted gross income
Net long-term capital loss carryoverNet short-term capital loss carryoverNet long-term capital loss carryover
Next year's AGI
Salary
Long-term capital gain
Less: net long-term capital loss carryovernet short-term capital loss carryovernet long-term capital loss carryover
Equals: net long-term capital gainnet long-term capital loss (before limitation)net short-term capital gainnet short-term capital loss (before limitation)net long-term capital loss (before limitation)
Deductible net long-term capital lossDeductible net short-term capital lossDeductible net long-term capital loss
Adjusted gross income
Total AGI
Current year
Next year
Total
Sell half of the stock this year and half next year:
Current year's AGI
Salary
Ordinary incomeOrdinary loss Ordinary loss
Long-term capital gain
Less: long-term capital loss no capital loss short-term capital loss no capital loss
Equals: net long-term capital gainnet long-term capital lossnet short-term capital gainnet short-term capital lossnet long-term capital gain
Deductible net long-term capital lossTaxable net long-term capital gainTaxable net long-term capital gain
Adjusted gross income
Next year's AGI
Salary
Ordinary incomeOrdinary lossOrdinary loss
Long-term capital gain
Less: long-term capital lossno capital lossshort-term capital lossno capital loss
Deductible net long-term capital lossTaxable net long-term capital gainTaxable net long-term capital gain
Adjusted gross income
Total AGI
Current year
Next year
Total