AS per the capital gains, stock sale increase Walter's taxes is $1,000
The term capital gains in the business is referred as the increase in a capital asset's value and is realized when the asset is sold.
Here we have given that Walter sold 100 shares of stock a for $5,600 in the current year. the sales commission Walter paid on this sale was $100. he purchased the stock in 2012 for $2,200. assuming Walter is single and had other taxable income of $300,000 and he has no other capital gains or losses.
And we need to find stock sale increase Walter's taxes
While we looking into the given question, if a tax-free distribution of stock is received by a shareholder, then the basis in the new stock is determined by allocating the basis in the old stock between the new stock and the old stock.
Therefore, the distribution of preferred stock made with respect to preferred stock is included in gross income [Sec. 305(b)(4)].
Here Walter’s basis in the new stock received from Donald Corporation is $1,000
=> (20 shares × $50 per share) = $1,000.
Therefore, amount will also have to be included in Walter’s gross income.
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