Peggy Rogers, a single taxpayer, purchased 10,000 shares of §1244 stock several years ago at a cost of $20 per share. She has received an offer to sell her stock for $12 per share. She has the option of either selling all of the stock now or selling half of the stock now and half of the stock in January of next year. Peggy will receive a salary of $75,000 for the current year and $85,000 for the next year. Excluding the §1244 stock, Peggy will have long term capital gains of $8,000 for the current year and $10,000 next year.
Required: Peggy’s goal is to minimize her AGI for the two years. Determine whether she should (1) sell all of her stock this year or (2) sell half of her stock this year and half next year. Prepare your answer in memo form to your managing partner. It must include both your recommendation and reasoning, with reference to the facts, and your calculations.