Silvia is 67 years old. Last year was a very hard year for Silvia. Her husband,

Question

Silvia is 67 years old. Last year was a very hard year for Silvia. Her husband, John, of 42 years died and her youngest daughter joined the military and left her son, Carlos (age 5) with Silvia shortly after John’s death. This year Carlos have been living with Silvia all year. Silvia received social security income of $20,000. Silvia also had annuity payments during the year of $10,000. She and John had purchased the annuity several years ago for $125,000. The annuity pays $10,000 per year for 20 years, or until both spouses have passed away, whichever occurs first. Silvia received $2,000 of municipal bond interest during the year. She municipal bond has a current yield of 2.5%. Silvia could buy taxable bonds with a yield of 3.2%. Silvia withdrew $10,000 from a Health Savings Account for medical expenses. She also withdrew $10,000 from a Traditional IRA. Using 2018 tax law, what is Silvia’s:

Filing status? (3 pts)

Number of dependents (2 pts)

Total gross income reported on the tax return EXCLUDING Social Security Benefits (8 pts)

Taxable amount of Social Security Benefits (4 pts)

Standard deduction amount (2 pts)

Taxable Income (2 pts)

Tax (2 pts)

Best bond option, should she stick with the municipal bonds or switch to taxable bonds (3 pts)

Explanation / Answer

Answer:

Filing status?

Husband died the current tax year and Silvia's has a dependent grandchild.
Filling Statu should be Qualified widoe with a dependent child.

Number of dependents

Carlos has been taking care of the child all the year.

So, grandchild Carlos is the dependent on Silvia.

Total gross income reported on the tax return EXCLUDING Social Security

the annuity is qualified as it provides retiremnt benefit. So that Annuity payment received is equal to 0.

Because of Federal tax exemption . Municipal bond interest recieved will become 0.

Withdrawl is made for health reasons so that withdraw from HSA is equal to the 0.

Withdrawl from traditional IRA = 10000.

SO Gross Taxable = sum of all above = 10000.

Benefits.

she is getting $20,000 only And $10000 as security benifit. which is less than the limit .

Total payable tax on sociel security benefits is 0. So she no need to pay.

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