Arnold was employed during the first six months of the year and earned a $90,000 salary. During the next 6 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 $60 interest). When he left his former employer, he withdrew his retirement benefits (a qualified annuity) in a lump-sum of $50,000. 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 he year and used the money for living expenses. Calculate Arnold’s adjusted gross income for the year
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Answer:
Arnold was employed during the first six months of the year and earned a $90,000 salary. During the next 6 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 $60 interest). When he left his former employer, he withdrew his retirement benefits (a qualified annuity) in a lump-sum of $50,000. He made no contributions to the plan. Arnold's parents loaned him $10,000
Interest Income $20,000.00
Social Secuity Benefits $10,000.00
Gain on Sale of Stock $8,000.00
MAGI $28,000.00
First Baseline $25,000.00
Second Baseline $34,000.00
MAGI + 0.5(SSB) $33,000.00
1. 0.50($10,000) = $5,000
"2. 0.50[$28,000+0.5($10,000)-$25,000]
0.5[$8,000]
$4,000"
$4,000<$5,000
$4,000 + $8,000 = $12,000
Explanation: