Question

Problem 5-67 (LO 5-2) [The following information applies to the questions displayed below.) George and Weezy received $28,900 of Social Security benefits this year ($10,900 for George; $18,000 for Weezy). They also received $4,750 of interest from jointly owned City of Ranburne Bonds and dividend income. What amount of the Social Security benefits must George and Weezy include in their gross income under the following independent situations? (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.) Problem 5-67 Part c. George and Weezy file married joint and receive $32,000 of dividend income from stocks owned by George. Amount to be included in gross income

Answer 1

Since a married joint return has been filed, base amount is 32,000 $ and upper limit is 44,000 $.

If combined income of George and Weezy falls between base amount and upper limit, upto 50% of social security benefits will be taxable and if it is more than 44,000$, then upto 85% may be taxable.

In the current case, combined income = (Exempt interest + Dividend Income = 50% of social security benefits) = (4750+32000+(50%*28900)) = 51,200 $ which is greater than 44,000$ and hence upto 85% will be taxable.

Hence, social security benefits to be included in gross income shall be lower of :

a) 85% of 28,900 $ = 24,565 $; or

b) 85% of (Modified AGI + 50% of Social security benefits - 44,000 $) plus lower of : i) 6,000 $ or ii) 50% of social security benefits = 85% of (51,200-44,000) + lower of i) 6,000 $ or ii) 14,450 $ = 12,120 $

Hence social security benefits to be included in gross income = 12,120 $