Question

In 2019, Sheryl is claimed as a dependent on her parents' tax return. Sheryl did not provide more than half her own support.

a. She received $7,000 from a part-time job. This was her only source of income. She is 16 years old at year-end.

b. She received $7,000 of interest income from corporate bonds she received several years ago. This is her only source of income. She is 16 years old at year-end.

c. She received $7,000 of interest income from corporate bonds she received several years ago. This is her only source of income. She is 20 years old at year-end and is a full-time student. (Do not round intermediate calculations.)

d. She received $7,000 of qualified dividend income. This is her only source of income. She is 16 years old at year-end. (Round your final answer to 2 decimal places.)

What is Sheryl's tax liability for the year in each of the following alternative circumstances? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates, Estates and Trusts for reference. (Leave no answer blank. Enter zero if applicable.)

Answer 1

Part A

Description	Amount	Explanation
(1)Gross income/AGI	7000	$7000 in wages All earned income
(2)Standard deduction for dependent on another tax return	(7350)	Earned income + $350
(3)Taxable income	0	(1) + (2)
Total tax	0

Part B

Description	Amount	Explanation
(1)Gross income/AGI (All unearned income)	7000	$7000 interest income (All unearned income)
(2) Minimum standard deduction	(1100)	Minimum for taxpayer claimed as dependent on another return
(3) $350 plus earned income	350	$350 + 0 earned income
(4)Standard deduction for dependent on another tax return	1100	Greater of (2) and (3)
(5)Taxable income	5900	(1) − (4)
(6) Gross unearned income minus $2,100	4800	(1) − $2,200
(7)Net unearned income	4800	Lesser of (5) or (6)
(8)Kiddie tax	788	[($2600 x 10%) + ((7) - $2600) × 24%)], trust and estate tax rate schedule)
(9)Taxable income taxed at Sheryl’s tax rate	1100	(5) − (7)
(10)Sheryl’s income tax rate	10%	Single filing status
(11)Tax on taxable income using Sheryl’s rate	110	(9) × (10)
Total tax	898	(8) + (11)

Part C

Description	Amount	Explanation
(1)Gross income/AGI (All unearned income)	7000	$7000 interest income (All unearned income)
(2) Minimum standard deduction	1100	Minimum for taxpayer claimed as dependent on another return
(3) $350 plus earned income	350	$350 + 0 earned income
(4)Standard deduction for dependent on another tax return	1100	Greater of (2) and (3)
(5)Taxable income	5900	(1) − (4)
(6) Gross unearned income minus $2,200	4800	(1) − $2,200
(7)Net unearned income	4800	Lesser of (5) or (6)
(8)Kiddie tax	788	[($2600 x 10%) + ((7) - $2600) × 24%)], trust and estate tax rate schedule)
(9)Taxable income taxed at Sheryl’s tax rate	1100	(5) − (7)
(10)Sheryl’s income tax rate	10%	Single filing status
(11)Tax on taxable income using Sheryl’s rate	110	(9) × (10)
Total tax	898	(8) + (11)

Part D

Description	Amount	Explanation
(1)Gross income/AGI (All unearned income)	7000	$7000 dividend income (All unearned income)
(2) Minimum standard deduction	1100	Minimum for taxpayer claimed as dependent on another return
(3) $350 plus earned income	350	$350 + 0 earned income
(4)Standard deduction for dependent on another tax return	1100	Greater of (2) and (3)
(5)Taxable income	5900	(1) – (4)
(6) Gross unearned income minus $2,100	4800	(1) − $2,200
(7)Net unearned income	4800	Lesser of (5) or (6)
(8) Parents’ preferential rate	15%
(9)Kiddie tax	720	(7) x (8)
(10)Taxable income taxed at Sheryl’s tax rate	1100	(5) − (7)
(11) Sheryl’s preferential rate	0%
(12) Tax on income using Sheryl’s preferential rate	0	(11) × (12)
Total tax	720	(9) + (12)