- 13 - We hold that petitioners received discharge of indebtedness income in 1996 when FmHA wrote off $177,772 of petitioners’ outstanding loan obligation. II. Social Security Benefits The second question raised by this litigation is whether a portion of the Social Security benefits received by petitioners is includable in their gross income. Although this issue is largely computational, we address it briefly to ensure lucidity. The parties stipulated that petitioners received such benefits in the amount of $3,420. Of this total, respondent contends that 85 percent, or $2,907, must be reported as gross income. Petitioners have offered no argument related to their Social Security benefits. Income tax treatment of Social Security benefits is governed by section 86. Section 86 applies to require inclusion of payments if the taxpayer’s adjusted gross income, with certain modifications not relevant here, plus one-half of the Social Security benefits received, exceeds a specified base amount. See sec. 86(b). This base amount, in the case of taxpayers filing a joint return, is $32,000. See sec. 86(c)(1)(B). Since petitioners reported adjusted gross income of $8,466 and we have just held that they must include an additional $177,772 from discharge of indebtedness, the base amount threshold is clearly exceeded.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
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