Social Security and Medicare

Solutions

Chapter 1

Knowledge check solutions

1. 1. Correct. Social Security was enacted in 1935.
   2. Incorrect. Medicaid was created by the Social Security Act Amendments of 1965, which added Title XIX to the Social Security Act.
   3. Incorrect. SSI began in 1974.
   4. Incorrect. Medicare began in 1965.
2. 1. Incorrect. The Medicare portion of FICA tax applies to unlimited amounts of wages.
   2. Correct. The taxable wage base operates to limit the OASDI portion of FICA tax.
   3. Incorrect. The Medicare portion of FICA tax applies to unlimited amounts of wages.
   4. Incorrect. The taxable wage base has nothing to do with discrimination in FICA taxation.
3. 1. Incorrect. IRA distributions are not considered in determining the amount of unearned income to which the new 3.8% tax on unearned income applies.
   2. Incorrect. Form 1099 income is earned income. The 3.8% Medicare surtax applies to unearned income.
   3. Correct. Long-term capital gain is considered in determining the amount of unearned income to which the new 3.8% tax on unearned applies.
   4. Incorrect. IRC Section 121 applies to the exclusion of gains on homes sales not exceeding $250,000 or $500,000 (on a joint return).

Chapter 2

Knowledge check solutions

1. 1. Incorrect. Six credits were the minimum amount to have fully insured status.
   2. Incorrect. Thirteen credits are not a minimum number of credits for any status of coverage.
   3. Correct. After 40 credits, the worker is permanently and fully insured and eligible for all (nondisability) benefits including retirement benefits. ...