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 receives 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's salary is $80,000 for the current year, and it will be $90,000 next year. Abby has long-term capital gains of $8,000 for the current year and will have $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.

Question Content Area

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

Sell half of the stock this year and half next year: Current year's AGI Salary $80,000 Ordinary loss 40,000 Long-term capital gain $8,000 Less: long-term capital loss 0 Equals: met long-term capital lase 8,000 Deductible net long-term capital loss = X 8,000 Adjusted gross income 48,000 Next year's AGI Salary $90,000 Ordinary loss 40,000 Long-term capital gain $10,000 Less: long-term capital loss O Deductible net long-term capital loss X 10,000 Adjusted gross income 160.000 Total AGE Current year 48,000 Next year 60,000 Total 108,000