Kirk Kelley, a single taxpayer, was engaged in the following transactions in 201
ID: 2451477 • Letter: K
Question
Kirk Kelley, a single taxpayer, was engaged in the following transactions in 2014:
-kirk lent a friend $2,500; that person did not pay the loan when it was due and then declared bankruptcy. the loan was deemed totally uncollectable
-kirk was notified on july 20 2014 by his stock broker that some corporate bonds he owned have become worthless. he had purchased the bonds for $12,000 on august 22, 2013
-kirk had a $40,000 loss on the disposition of sec.1244 stock purchased several years ago.
1. What are the nature and amount of the losses on Kirk's transactions?
2. What is his AGI for 2014 assuming gross income before the transactions was $700,000?
Explanation / Answer
The nature of loss in second case is market loss and the amount of loss is $12,000
The nature of loss in third case is personal loss and the amount of loss is $4,000
Losses: ($2500+$12000+$40000) which is equal to $54,500
Assumed Gross Income is $700,000
Therefore the AGI is $700,000-$54,500 which is equal to & 645,500
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