Question

1. Problem 9-21 (Algorithmic) (LO. 2, 3)

   Taylor, age 16, is a dependent of her parents. For 2018, she has the following income: $5,000 of wages from a summer job, $1,820 of interest from a money market account, and $1,875 of interest from City of Boston bonds.

   If required, round your answers to the nearest dollar. If an amount is zero, enter "0".

   a. Taylor's standard deduction for 2018 is $.

   Taylor's taxable income for 2018 is $.

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   To reduce the tax savings that result from shifting income from parents to children, the net unearned income (commonly called investment income) of certain children is taxed using special rules. This provision, commonly referred to as the kiddie tax, applies to any child who is under age 19 (or under age 24 if a full-time student)

   b. Compute Taylor's "net unearned income" for the purpose of the kiddie tax.
   $

   Click here to access the 2018 tax rate schedule

   Compute Taylor's tax liability.
   $.

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   Incorrect

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   Incorrect

Answer 1

dear student,

if any doubts, then feel free to ask.

Part A

Standard deduction = $5300

Taxable income = 3395

Earned income	5000
Unearned income (1820+1875)	3695
Gross income	8695
Less: standard deduction	(5300)	(greater of 1050 or (earned income +300) maximum upto 12000
Taxable income	3395

Part B

Net unearned income = 3695 -2100 (exempted unearned income) = $1595

Tax liability = (10%*1595)+(10%*(3395-1595)) = 339.50