Question

Part1 Ivette received Social Security benefits during the current year of $15,400. Ivette's only other sources of income were wages of $16,000, interest income from corporate bonds of $4,000, and taxable domestic dividends of 1,100. Ivette is single, 72-years of age, and has no dependents. a. Calculate Ivette's AGI. b. What would be Ivette's AGI if Ivette also had tax-free municipal bond interest income of $9,600. Part2 Sebastian had a rather good year in 2020. Sebastian is unmarried and provides over one-half of the support for his 39-year-old roommate who legally lives in the home for the entire year. Sebastian had the following for 2020: Salary $61,744 Interest income 8,875 Rental income 22,350 Rental expenses 12,350 QBI deduction from AGI 2,000 Standard deduction 12,400 Itemized deductions 13,700 Calculate Sebastian's adjusted gross income, taxable income, and net income tax before prepayments.

Answer 1

Part 1 A Calculation of Ivette Adjusted Gross Income Particulars Amount ($) Wages 16000 Interest from corporate bonds 4000 Taxable dividends 1100 Social security benefits 7700 Adjusted Gross Income 28800 Combined income = 21100 + 50% of 15400 = 28800 Combined income is more than $24000 therefore 50% of SSB is taxable * For Individual Receiving social security benefits If the combined income is <$25000 No tax $25000<$34000 Tax on 50% SSB >$34000 Tax on 80% SSB Combined Income= Adjusted gross income + Non taxable interest +50% of SSB

00 B Calculation of Ivette Ajusted Gross Income Particulars Amount ($) Wages 16000 Interest from corporate bonds 4000 Taxable dividends 1100 Social security benefits 12320 Adjusted Gross Income 33420 Combined Income = 21100+7700+9600 = 38400 Combined income is more than $34000 therefore 80% of SSB is taxable

Part 2 Calculation of Adjusted gross income and Taxable income Particulars Amount ($) Salary 61744 Interest Income 8875 Net rental income (22350-12350) 10000 Qualified Business Income (2000/20%) 10000 Adjusted Gross Income 90619 QBI deduction 2000 Itemized deduction 13700 Taxable income 74919 QBI is allowed upto 20% of Qualified business income Qualified business income = 2000/.2 = 10000 Standard deduction or itemized deduction whichever is higher can be claim as deduction

Income tax payable $0 to $9700 = 10% $9701 to $39475 = 12% $39476 to $84200 = 22% Tax payable Amount $970 $3573 $7797.68 $12340.68 Computation (9700*.1) (39475-9700)*.12 (74919-39475)*.22