Final answer:
The percentage of Social Security benefits included in gross income for taxation purposes varies based on other income sources. Rory, with $200,000 in additional income, will include up to 85% of his benefits, while Nicholi may not need to include any as that is his sole income.
Step-by-step explanation:
The question pertains to the determination of the percentage of Social Security benefits that must be included in gross income for tax purposes. This depends on other income received by the beneficiaries. Rory, who has $200,000 in other income, will likely have up to 85% of his Social Security benefits subject to tax. Nicholi, whose only source of income is Social Security, may not owe any taxes on his benefits, or a smaller percentage up to 50%, depending on his filing status and total income.
According to the IRS, if half of your Social Security benefits plus your other gross income is more than $25,000 for an individual or $32,000 for a married couple filing jointly, then up to 50% of your benefits will be taxable. If these income figures exceed $34,000 for an individual or $44,000 for a married couple, up to 85% of your benefits may be taxable.
Rory's high other income places him squarely in the category where he would need to include up to 85% of his Social Security benefits in his gross income. Nicholi, with no other income, might not have to include his Social Security benefits in his gross income at all, though this can be subject to specific tax details that were not provided in the question.