Question

In the current year, Marc, a single taxpayer, has ordinary income of $35,000. In addition, he has $3,000 in short-term capital gains, short-term capital losses of $6,000, and long-term capital gains of $4,000. What is Marc's adjusted gross income (AGI) for the current year?

Answer 1

Answer:

Marc's Adjusted gross income (AGI) for the current year is $32,000

Explanation:

Adjusted Gross Income (AGI): is the net income realized after deduction all the adjustments that reduce the total amount of the gross income. AGI is used mainly for calculation of tax returns, that is it is used to calculate what the actual tax should be based on what you really earn after adjustments.

In our example, the incomes within the current year are; ordinary income and short term capital gains. we do not use long term capital gains because they are gains on investments realized later than one year, and we are interested in the current year, while the adjustment to be deducted is the short term capital losses ($6,000). Hence;

AGI = (ordinary income + short term capital gain) - short term capital losses

AGI = (35,000 + 3000) - 6,000 = $32,000.