E, Who Is 68 Years Old and Married, Retired on July

question 46

Multiple Choice

E, who is 68 years old and married, retired on July 1 of the current year.His current year income is shown below. Salary (prior to retirement) $\quad \$ 15,000$
Pension payments (all taxable) $\quad$$\quad$ 14,000
Dividends $\quad$$\quad$$\quad$$\quad$$\quad 2,000$
Tax-exempt bond interest $\quad$$\quad 3,000$
Social security benefits $\quad$$\quad$ 5,000 Assume E has no deductions for adjusted gross income and that Mrs.E has no income.The amount of social security benefits that E must include in taxable income on a joint return for the current year is

• A)$5,000
• B)$0
• C)$2,250
• D)$2,500

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Definitions:

Treasury Stock

Shares that were once part of the outstanding shares and have been bought back by the issuing company, reducing the amount of outstanding stock on the market.

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures. YTM is considered a long-term bond yield expressed as an annual rate.

Semiannual Coupon Bonds

Bonds that pay interest to their holders twice a year.

Flotation Cost

The total costs associated with issuing new securities, including fees, taxes and underwriting expenses, which are incurred by companies when they raise new capital.