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

The answer to this question can be defined as follows:

Step-by-step 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* 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* 15 \%)` with a
`15\%`MTR after the tax income.

For point c:

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

Smaller than that one

Calculated amount with the first formula

Less:

`0.5* 12000 = \$6000\\\\0.5(\$65000+0.5 * 12000-\$32000)= \$19500 \ \ or \ \ \$6000\\\\\$22950 +\$6000 = \$28950 \\\\2.0.85 * 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.