Aquaman, a retired widower, has $20,000 of interest and dividend income and also

Question

Aquaman, a retired widower, has $20,000 of interest and dividend income and also receives $10,000 in Social Security benefits. Aquaman is considering selling some stock. If he sells the stock he will have an $8,000 capital gain that he will report as income. (20 points) a. Assuming Aquaman does not sell the stock, what is Aquaman’s MAGI and what amount of his social security benefits are taxable? b. Assuming Aquaman does sell the stock, what is Aquaman’s MAGI and how much of his social security benefits will be taxable?

Explanation / Answer

If Aquaman is Not sell the stock then,

Marginal adjusted Gross Income = Interest + 1/2 of social security benefit

Then,

Matginal Adjusted Gross income = 20,000 + 1/2 * 10000

Marginal Adjusted Gross Income = $25,000

Socail Security benefit of amount 5,000 is taxable. Because it is clearly written that if your interest and dividend income then your social security benefit is half taxable of your recieved amount of which income is between 25000 to 34000. If income is greater then 34,000 than 85% of security benefit are taxable.

B. Marginal Adjusted gross Income if ge sells the stock. Then,

MAGI = Interest + Dividend + Capital Gain + 1/2 of security benefit

MAGI = 20,000 + 8,000 + 1/2 of 10,000

MAGI = $ 33,000

There is also adjusted Gross income is less than 34,000 then 50% of social benefit are taxable.

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