Follow-up to Earlier Post:
After just writing and explaining that $700 wa not showing up in taxable income, I looked over 1040 one more time and just discovered that the $700 is included in the taxable income of 1040 and supporting worksheets on lines 5a and 5b for Pensions, Annuities and taxable amount. Sorry it took me an entire day to figure this out. and not sure why it's being thrown in with pensions and annuities.
