Question

Adjusted Gross Income. Amir, who is single, retired from his job this year. He received a salary of $25,000 for the portion of the year that he worked, tax-exempt interest of $3,000, and dividends from domestic corporations of $2,700. On September 1, he began receiving monthly pension payments of $1,000 and Social Security payments of $600. Assume an exclusion ratio of 40% for the pension. Amir owns a duplex that he rents to others. He received rent of $12,000 and incurred $17,000 of expenses related to the duplex. He continued to actively manage the property after he retired from his job. Compute Amir's adjusted gross income.

Answer 1

Computation of Amir's Adjusted Gross Income:

Particulars	Amount($)
Salary	25,000
Dividend Income	2,700
Pension Income (Working note-2)	2,400
Rental Income	12,000
Social Security income(WN-3)	1,200
Gross Total income	43,300
Less:deductions From AGI Rental expense	(17000)
Adjusted Gross Income	$26,300

Working Notes:

1)Tax Exempt interest is not considered while computation of Tax for federal purposes

2)Computation Of pension:

Since the monthly pension began on September,

No.of months he received pension=4months

Total pension amount= $1000*4=$4000

Exclusion ratio (40%) = (1600)

Taxable pension =$2400

3)Social Securiy payments:

Monthly payment of $600 for 4 months

Total Social security income = 600*4=$2400

Only 50% of above income is taxable

Taxable Social security income =2400*50%= $1200