Nicholas owned stock that decreased in value by $20,000 during the year, but he did not sell the stock.He earned $45,000 salary, but received only $34,000 because $11,000 in taxes were withheld.Nicholas saved $10,000 of his salary and used the remainder for personal living expenses.Nicholas's economic income for the year exceeded his gross income for tax purposes.

Question

Quizplus · Accepted Answer

Economic income includes all forms of income, including unrealized gains or losses on investments. Since Nicholas's stock decreased in value, this loss would be considered in his economic income but not in his gross income for tax purposes, as it was an unrealized loss (he did not sell the stock). His gross income for tax purposes would only include the salary earned, not the decrease in stock value or the taxes withheld.

Nicholas Owned Stock That Decreased in Value by $20,000 During