Please ask your question here:Why is Social Security income not considered taxable in this question?
Original Fast Forward Academy test bank question:
Peter is single and provides more than half of the support for his father, who lived with Peter for all of 2010. His father's income in 2010 consisted of $2,000 in wages, $4,000 in Social Security benefits, $1,200 of municipal bond interest, $1,000 of corporate bond interest, $1,400 of dividends, $4,000 of rent income, and $2,000 of rent expenses. How much 2010 gross income does Peter's father have for determining the dependency exemption?
Gross income is all income in the form of money, property, and services that is not exempt from tax. Social Security benefits (in this example) and municipal bond interest are not taxable and not included in gross income for this test. The question asks about gross income for purposes of a dependency exemption, which includes rental income (before deductions). Do not deduct taxes, repairs, etc., to determine the gross income from rental property. .
FFA EA Book Reference: CH 1 Filing Information Subsection: Tax Returns for Individuals Taxpayer Data Subject: Personal exemptions including dependents Correct Answer: B
To find out whether any of the benefits may be taxable, compare the base amount Social Security Benefit; $25,000 if you are single, head of household, or qualifying widow(er), $32,000 married filing jointly.
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Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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