Problem 4-54 (LO. 4, 5)

Linda and Don are married and file a joint return. In 2020, they received $12,000 in Social Security benefits and $35,000 in taxable pension benefits and interest. The applicable higher/lower bases for Social Security computations for married filing jointly are $32,000 and $44,000.

a. Compute the couple's adjusted gross income on a joint return. $

b. 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%.

Although the interest received on the state bond is taxable , it still is included in modified adjusted gross income, impacting the taxability of the Social Security benefit. Their AGI would be $.

c. In the preceding situation part (a), if Linda works part-time and earns $30,000, by how much would Linda and Don's adjusted gross income increase?