Question

Required information [The following information applies to the questions displayed below.] George and Weezy received $31,300 of Social Security benefits this year ($12,100 for George; $19,200 for Weezy). They also received $5,350 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.) b. George and Weezy file married separate and receive $9,850 of dividend income from stocks owned by George.

Answer 1

Taxable income will be $10285 for G and $10434 for W

Explanation

If a married taxpayer are filing separate return then, the lower of 85% of the sum of modified AGI or 50% of social security benefits or 85% of their social security benefit would be liable to tax.

Compute the amount to be included by G in its taxable income:

Taxable income = lower of (85% of social security benefit) or [85% {(modified AGI ) +(50% of social security benefit)}]

= Lower of $10285 or $15789

= $10285

Working note:

Compute the modified AGI of G:

Modified AGI = Dividend + G's interest income

= $9850 + ($5350 × 50%)

= $9850 + $2675

= $12525

Computation of sum of modified AGI and 50% of social security benefit for G.

50% of social security benefit and modified AGI =

= $12525 + (50% × $12100)

= $12525 + $6050

= $18575

Computation of taxable income of W:

Taxable income = lower of (85% × $19200) or (85% × $12275)

= Lower of $16320 or $10433.75

= $10434

Working note:

Modified AGI = $0 + (50%×$5350) = $2675

Computation if sum of MAGI and 50% of social security benefit for W

= $2675 + (50% × $19200) = $12275

PLEASE DO GIVE A THUMBS UP