Question

PI:5-36 (similar to) Question Help Brogan received 700 shares of Denver Corporation stock from his unde as a gift on July 20, 2017, when the stock had a $175,000 FMV. His uncle paid $112.000 for the stock on April 12, 2002. The table gift was $175.000, because his uncle made another gift to Brogan for $22.000 in January and used the annual exclusion The uncle paid a gift tax of $17.500. Without considering the transactions below. Brogan's AGI is $80,000 in 2018. No other transactions involving capital assets occur during the year Read the requirement AG! prior to sale of stock 80,000 80,000 80,000 - Gain (loss) on sale of stock 63.700 (1.000) 54,700 AGI 143,700 70,000 134,700

Answer 1

Qn1. In the first question it is declard that the stock which is already held by Borgan's uncle was given to             Borgan     as a gift. The detailed calculations are below.

The FMV as on 20.07.2017 for 700 shared        - $175000

FMV of per unit of shares                               - $175000/700 = $250

His uncle bought this 700 share for $112000

so, The per unit cost of share or purchase price of shares is $160/share ( 112000/700=160)

The diffrence between purchase price and FMV of single share is $250-$160= $90

The profit or the growth of 700 shares $90x700 = 63000

In the question it is given that uncle had made another gift to Borgan an amount of $22000 which is excluded.

It is given in the question that The AGI of Borgan at the end of 2018 is $80000.

It is hereby noted that:-

Adjusted Gross Income (AGI) = Gross income - Adjustments

Gross total income includes wages or salary from a job, bank account interest, stock dividends and rental property income etc and excludes life insurance payments, child support, loan proceeds, inheritances or gifts etc.

So. in our question the amount recieved as gift by Borgan will not be include in the calculation of his AGI.

So, The AGI of $80000 without considering the above is correct if even consider the transactions as it is purely a gift.