In the case of lump-sum social security benefits, how are they treated for tax purposes according to the election?

Lump-sum social security benefits can indeed be treated for tax purposes as if they were received in prior years. When a taxpayer receives a lump-sum payment for social security benefits, they can elect how to report the income for tax purposes.

This option allows the taxpayer to go back and allocate the lump-sum benefits to the years they were originally entitled to receive them, which can often reduce the total amount of tax owed. By using this method, taxpayers can potentially avoid being pushed into a higher tax bracket due to the additional income being reported in the current year. This treatment aligns with the tax principle that aims to reflect income in the period it was earned, providing a more accurate picture of the taxpayer's financial situation over those years.

The other options do not reflect the correct treatment of these benefits under tax law regarding lump-sum social security payments. Choosing to report the income as if it were received in the current year or allocating evenly among the years does not take into account the stipulations governing the reporting of these benefits, which emphasize their attribution to prior years.