Question

Problem 4-54 (LO. 4, 5) Linda and Don are married and file a joint return. In 2020, they received $12,000 in Social Security benefits and $35,000 in taxable pension benefits and interest. The applicable higher/lower bases for Social Security computations for married filing jointly are $32,000 and $44,000. a. Compute the couple's adjusted gross income on a joint return. $fill in the blank 7fe2a4f7afc4f82_1 b. Don would like to know whether they should sell for $100,000 (at no gain or loss) a corporate bond that pays 8% in interest each year and use the proceeds to buy a $100,000 nontaxable State of Virginia bond that will pay $6,000 in interest each year. Assume that their marginal tax rate is 12%. Although the interest received on the state bond is , it still is in modified adjusted gross income, impacting the taxability of the Social Security benefit. Their AGI would be $fill in the blank c572caf67feefd0_3 . c. In the preceding situation part (a), if Linda works part-time and earns $30,000, by how much would Linda and Don's adjusted gross income increase

Answer 1

Answer:

The answer to this question can be defined as follows:

Explanation:

For point a:

Chargeable advantages to social welfare:

$=0.5(\ 35000+0.5(\ 12000)-\ 32000)\\\\ =0.5(9000)\\\\=\ 4500$

Pension benefits etc $35 thousand

Total AGI= $\ 39,500$

For point b:

Additional revenue $(\ 3,500-\ 8,000) = \ 27,000$

Taxable $SSB0.5(27000+\ 6000+0.5\times 12000-\ 32000)=\ 3500$

AGI = $\ 30,500$

Less: AGI in (a) $(\ 39,500)$

Decrease $(\ 9000)$

Tax payers' financial income has been down by $\ 2000$, but taxable AGI is down by $9,000. The reduction of $\ 650(\ 2000-\ 9000\times 15 \%)$ with a $15\%$MTR after the tax income.

For point c:

The least of follows $1). \ \ 0.85( \ 65000+0.5 \times 12000-\ 44000) = \ 22950$

Smaller than that one

Calculated amount with the first formula

Less:

$0.5\times 12000 = \ 6000\\\\0.5(\ 65000+0.5 \times 12000-\ 32000)= \ 19500 \ \ or \ \ \ 6000\\\\\ 22950 +\ 6000 = \ 28950 \\\\2.0.85 \times 12000 = \ 10200$

That is why Linda and Don have $85\%$of their gross income from the SSB $\ 10200$.

The benefits of social security $\ 10200$

Additional revenues $=\ 35000+\ 30000 \ \ (addl.inc)= \ 65000$

AGI $\ 75,200$ 

Less (a) AGI ($\ 39,500$)

Increases $\ 35,700$ 

AGI growth exceeds earnings increases because more SSB is taxed.