Question

Arnold was employed during the first six months of the year and earned a $90,000 salary. During the next six ~months, he collected $7,200 of unemployment compensation, borrowed $6;000 (using his personal residence as collateral), and withdrew $1,000 from his savings account (including $50 interest). When he left his former employer, he withdrew his retirement benefits (a qualified annuity) in a lump sum of$60,000. He made no contributions to the plan. Arnold's parents loaned him $10,000 (interest-free) on July 1, of the current year, when the Federal rate was 3%. Arnold did not repay the loan during the year and used the money for living expenses. Calculate Arnold's adjusted gross income for the year.

Answer 1

ANSWER:-

1. Calculate Arnold's adjusted gross income for the year.

Particulars	Amount
Salary	$90,000
Unemployment Compensation	$7,200
Interest Income	$50
Retirement Benefit in a lump sum	$60,000
Adjusted Gross Income	$ 157,250

Therefore, Arnold's adjusted gross income for the year is $ 157,250

[Notes: The interest-free loan will not be included in adjusted gross income as interest free loan of up to $10,000 from parents is exempt if the same has not been used for income generation purposes.]

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