Neither. Up to 85% of the SS benefits may be included. A lower percentage is taxable if the taxpayer has “provisional income” less than $44,000, but it requires a complex calculation. To find that go to IRC Sect 86 or the Social Security Benefits Worksheet on your Form 1040. It gets worse. The mutual fund sales will most likely be longterm capital gain, so you will need to complete Schedule D to their 1040 to determine that number. You might be better off to invest in TurboTax software, which I use but do not sell.
DISCLAIMERâ€”This answer is for informational purposes only under the AVVO system, its terms and conditions. It is not intended as specific legal advice regarding your question. The answer could be different if all the facts were known. This answer does not establish an attorney client relationship. I am admitted only in California. (Bryant) Keith Martin sbbizlaw.com
Mr Martin has given you a good response about the tax issues. You either need to obtain some software to run the calculations or hire an account to review your douments and perform some projections about the sales prices and proceeds in, order to calculate tax liability - or to figure out what to sell to stay below the taxable amounts. Better to pay an accountant now and do it right than pay taxes, interest and or penalties later on.
Best of luck to you.
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My colleagues have given you good answers. Up to 85% of Social Security benefits may be taxable, depending on the person/couple's other income.
Your parents would be well advised to contact a tax professional about this before cashing in any IRA monies, to make sure they pay sufficient estimated taxes for the IRA monies cashed in. These estimated taxes, if any, would be due in January, before April 15th.
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