54. Decision Making
Planning
LO.4,5 Linda and Don are married and file a joint return. In 2022, they received $12,000 in Social Security benefits and $35,000 in taxable
pension benefits and interest.
1. Compute the couple’s adjusted gross income on a joint return.
2. 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%.
3. If Linda in part (a) works part-time and earns $30,000, how much will Linda and Don’s adjusted gross income increase?
1)
2)
3)
MAGI =35000+0+0
Provisional income =35000+.5*12000
Taxable SSB equal to the lesser of:
50% of benefit income =.5*12000 or
50% of provisional income in excess of 32000=.5*(41000-32000)
35000
41000
Income (broadly defined)
Less: exclusions
Gross income
Less: deductions for AGI
AGI
Less: greater of standard or itemized deductions
Less: QBI deduction
Taxable income
Tax
ATCF =35000+12000-1360
47000
7500
39500
0
39500
25900
0
13600
1360
45640
MAGI =35000-8000+0+6000
Provisional income =33000+.5*12000
Taxable SSB equal to the lesser of:
50% of benefit income =.5*12000 or
50% of provisional income in excess of 32000=.5*(39000-32000)
33000
39000
Income (broadly defined)
Less: exclusions
Gross income
Less: deductions for AGI
AGI
Less: greater of standard or itemized deductions
Less: QBI deduction
Taxable income
Tax
ATCF =35000-8000+12000+6000-460
45000
14500
30500
0
30500
25900
0
4600
460
44540
MAGI =65000+0+0
Provisional income =65000+.5*12000
Taxable SSB (85%) =.85*(71000-44000)+lesser of:
.5*(71000-32000) or .5*(44000-32000)
Not to exceed 85% of SSB
65000
71000
Income (broadly defined)
Less: exclusions
Gross income
Less: deductions for AGI
AGI
Less: greater of standard or itemized deductions
Less: QBI deduction
Taxable income
60000
4500
60000
3500
28950
10200
77000
1800
75200
0
75200
25900
0
49300
35700
Tax
ATCF =65000+12000-5505
5505
71495
25855