Question

4) J.Z. (single taxpayer) is retired and received $10,000 of Social Security benefits this year. How much of the $10,000 Social Security benefits is taxable if his only other income was $28,000 of pension income?

5) This year Ann has the following stock transactions. What amount is included in her gross income if Ann paid a $200 selling commission for each sale?

Shares Firm Total Purchase price Sales price Value at year end

100 IBM $ 5,000 $7,000

200 ATT 7,500 $ 9,500

500 Dell 12,500 13,000

Answer 1

4. J.Z.'s modified AGI plus 50% of his social security benefits is equal to $28,000 + $5,000 = $33,000. So his taxable social security benefits are the lesser of (1) $5,000 (50% of his social security benefits) or (2) $4,000 (being 50% of ($28,000 modified AGI + $5,000 (50% social security benefits) - $25,000).

Answer is therefore $4,000.

5. For ATT: ($9,500 - $200) - $7,500 = $1,800

For Dell: ($13,000 - $200) - $12,500 = $300

For IBM: The increase in value in IBM stocks is not realized yet (as it is still not sold).