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# Treatment of items in Pierce's AGI; Calculate state taxable

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Pierce has a \$16,000 Section 1231 loss, a \$12,000 Section 1231 gain, and a salary of \$50,000. What is the treatment of these items in Pierce's AGI?

A) Pierce has a LTCG of \$12,000 and a net ordinary income of \$34,000.
B) The 1231 gains and losses are treated as ordinary gains and losses making Pierce's AGI for the year \$46,000.
C) Pierce has a \$3,000 LTCL which is deductible for AGI making AGI \$47,000. He also has a \$1,000 LTCL carryover.
D) Pierce has net LTCG of \$9,000 and \$37,000 of net ordinary income.

Husband and wife, who live in a common law state, are eligible to file a joint return for 2010, but elect to file separately. They do not have dependents. Wife has adjusted gross income of \$25,000 and has \$2,200 of expenditures which qualify as itemized deductions. She is entitled to one exemption. Husband deducts itemized deductions of \$11,200. What is the taxable income for the wife?

A) \$19,300
B) \$19,150
C) \$21,350
D) \$22,800

#### Solution Preview

For the calculation of AGI for Pierce:
Salary \$50,000
Section 1231 ordinary loss (\$16,000)
Section 1231 capital gain \$12,000
AGI \$46,000

By definition, Section 1231 gain relates to business property that has been held for over one year, and is treated as a capital gain.

A Section 1231 loss is a business loss that is fully deductible as an ...

#### Solution Summary

The solution shows the calculations for the answers, but also provides references and information in explanation of the answers.

\$2.49