Question

7. In 2019, Taxpayer (“T”) is a single, 65 year-old individual who is a U.S. citizen. T turned 65 in 2019. T receives $18,000 of social security income in 2019 (the first year T received Social Security Benefits). Also, T received $6,000 of interest income from a municipal bond in both 2018 and 2019. On June 1, 2018, T took a job with a multi-national corporation which paid T $5,000 per month. As a condition of the job, T is required to work overseas, in the country of Austria, and T did in fact work in Austria for 214 days (From June 1 – December 31) in 2018. T is offered to continue to work (still in Austria and still for $5,000 per month) for seven additional months (from January 1 until the end of July, which is 211 days) in 2019, at which point T’s position would terminate. T is trying to decide whether T wants to continue to work for seven months in 2019 or quit on January 1. (These are T’s only transactions during 2018 and 2019).

a. What is T’s Gross Income in 2019 if T continues to work through July of 2019? __________________________________

b. What is T’s Gross Income in 2019 if T does NOT continue to work in 2019? __________________________________

c. Excluding the effects of the payroll tax and any credits, What is the economic benefit to T of continuing to work for 7 months in 2019 (meaning how much total extra money, after tax, will T have as a result of continuing to work in 2019)? _____________________

Answer 1

Income calculation of Tax Payer (T) 65 old individual of US citizen in financial year 2018-19 & 2019-20
Income received by Tax payer (T) from social security scheme and interest income from muncipal bonds
Year	Social Security Income	Interest from muncipal bond	Total
2018	-	$6,000	$6,000
2019	$18,000	$6,000	$24,000
T' took a Job for a monthly renumeration of $ 5000 with MNC and required to work overseas in Austria
Time period ( year wise) in which 'T' serve the company
Year	Duration for which 'T' took a job	Duration of job in months	Salary per month	Total Salary (in $)
2018	01st June-18 to 31st Dec-18	7 month	$5,000	$35,000
2019	01st Jan-19 to 31st July-19	7 month	$5,000	$35,000
Solution (a)
T's gross income in 2019 if T continue to work through July-2019
T's gross income in 2019 are as follows:
Particulars	Amount
Social Security income received during the year	$18,000
Interest income received from municipal bond during the year	$6,000
Salary of 7 months @ $5000 per month received during the year	$35,000
Total income received by 'T' in year 2019	$59,000
Henceforth in year 2019 Gross Income of 'T' is $ 59000 if 'T' continue to work through July of 2019
Solution (b)
T's gross income in 2019 if T does not continue to work in 2019
T's gross income in 2019 are as follows:
Particulars	Amount
Social Security income received during the year	$18,000
Interest income received from municipal bond during the year	$6,000
Total income received by 'T' in year 2019	$24,000
Henceforth in year 2019 Gross Income of 'T' is $ 24000 if 'T' does not continue to work in 2019
Solution ('c)
Economic benefit to 'T' of continuing to work for 7 months in 2019:
If 'T' continue to work in 2019 then he 'll able to earn monthly salary of $5000 per month for the period of 7 months, henceforth the total extra money earned by 'T' in that case is $35000