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 gross income for tax purposes exceeded his economic income for the year.

Question

Quizplus · Accepted Answer

Gross income for tax purposes includes not only income earned, but also other sources such as gifts, prizes, and the increase in value of assets, even if they were not sold. Therefore, Nicholas's gross income for tax purposes would include both his salary and the decrease in value of his stock, which exceeds his economic income for the year.

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