Question

ork eBook Calculator Printem Problem 6-9 Uncanned Income of Minor Children and Certain Students (LO 6.4) Brian and Kim have a 12 year old child, Stan. For 2019, Brian and Kim have taxable income of $52,000, and Stan has interest income of $4,500. Click here to access the income tax rate schedules. II Stan's parents elected to report Stan's income on his parents' retum, what would the tax on Stan's income be? 370 X Paedias Chow To prevent income shifting, the tax rules required the child to pay tax at the parent's rate (generally referred to as the "kiddie tax") on uneamed income from interest, dividends, and capital gains on stock sales. In an effort to simply the tax of a child's unearned income, the TCA has changed the rate on which the child's tax is computed. Instead of using the parent's rate, the child now computes tax using the trust and estate tax rates. The tax on a childs uneared income applies to dependent children who are ages 18 or younger and full-time students ages 19 through 23 at the end of the year, who have at least one living parent, and who have "net uneamed income of more than $2,200 for 2019. If certain conditions are met, parents may clect to include a chids gross income on the parents' tax rotum. The cloction eliminates the child's return filing requrements and saves the parents from the trouble of filing the special calculation on Form 8615 for the kiddie tax." D 1 -12 5-14 Previous Check My Work SS: 9:20 items Type here to search O a AENG 5:58 PM 9/23/2020 6 E R F 7 3 D F G لی۔ K L 4 드 B N M 2 3 alt cari USE YOUR SMARTPHONE FOR - Reviews - Videos - Features • Specs Support SCAN

Answer 1

Earned Income	$0
Interest Income (unearned)	$4,500
Adjusted Gross Income	$4,500
Standard Deduction [Greater of 1,100 or (earned income+350)]	($1,100)
Taxable Income	$3,400
Statutory deduction - subject to ordinary rates (2,200-1,100)	($1,100)
Net uneanred income ,subject to kiddie tax	$2,300
Stan's tax for 2020 [workings]	$340

Workings:

Tax on first ($2,200 - $1,100) at ordinary rates @10% = $110

Tax on Income subject to kiddie tax $2,300 * 10% = $230

Total tax on Stan's income = $110 + $230 = $340