Question

In 2019, Jake and Mary Jacobs, a married couple, have specially modified adjusted gross income $25,000 and $10,000 in social security benefits. If the Jacobs file a joint return, what portion of their social security benefits are included in income for federal income tax purposes?

1) $10,000

2) $5,000

3) $2,500

4) $1,000

5) $0

Question 4
On February 10, 2019, Rose was in an automobile accident while she was going to work. The doctor advised her to stay home for six months due to her injuries. On February 25, 2019, she files a lawsuit. On July 20, 2019, Rose returned to work. On December 15, 2019, the lawsuit was settled received the following amounts:

         
    Compensation for lost wages   $25,000
    Personal injury damages awarded (none of which was for punitive damages)   40,000

How much of the settlement must Rose include in ordinary income on her 2019 tax return?

1) $0

2) $25,000

3) $40,000

4) $65,000

Answer 1

Answer is option 5

5) 0

As there is modified gross income is 25000+10000= 35000, so 50% of social security benefits should be taxable but as they have not received any social security benefit it should be 0.

Part 4

Answer is option 2

2) $25,000

Compensation for lost wages must be included in gross income.