Larry, a calendar year cash basis taxpayer, has the following transactions: Based on this information, Larry has:

Question

Larry, a calendar year cash basis taxpayer, has the following transactions:  Based on this information, Larry has:

Quizplus · Accepted Answer

- Larry's salary income: $45,000
- Interest income: $2,500
- Alimony received: $3,000
- Medical expenses: ($500) - Since Larry's medical expenses are less than 7.5% of his AGI, he cannot deduct them.
- AGI = $45,000 + $2,500 + $3,000 = $50,500
- However, Larry also has a capital loss of $500. Since he is a calendar year taxpayer, he can only deduct up to $3,000 of capital losses in a given year. Thus, he can only deduct $500 of the $3,000 loss this year, and the remaining $2,500 will carry forward to future tax years. Therefore, Larry's AGI = $50,500 - $500 = $50,000.
- Adding the deduction for his IRA contribution of $1,000 brings his AGI to $51,000.

Larry, a Calendar Year Cash Basis Taxpayer, Has the Following