Question

Which of the following statements is not correct on investment interest? Choose one answer. a. Form 4952 is used to determine the deductible investment interest b. Investment income includes interest, dividends, royalties, and annuities. c. Investment income is generally derived from a non-passive activity. d. X Sally is single, age sixty, and works as a sales clerk in 2018. She has no other income. Sally contributed $2000 to her IRA. After the adjustment for her IRA deduction, the AGI on her return is $26,000. What is the maximum retirement savings contribution credit she can claim? Choose one answer. a. $0 b. $200 c. $400 d. $ X Phil, age 20, is single and can be claimed as a dependent on his parent's return. He had $150 in interest income and wages of $7,000. What is his standard deduction? 1Choose one answer. a. $7,000 b. $7,150 c. $7,350 d. $IX

Answer 1

• Which of the following is not correct on investment interest :

Ans : b

Investment income includes interest, dividends, royalties and non-qualified annuities from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer.

A qualified annuity is bought with pre - tax dollars that usually come from an IRA account 401 ( k) or some other retirement fund.

• Maximum retirement saving contribution credit that Sally can claim :

b). $ 200

In 2018, AGI of Sally is between $ 20.501 - $ 31,500 . So, she can claim 10% of her contribution to IRA. She contributed $ 2,000 to IRA then maximum retirement saving contribution credit she can claim is $ 200.

• Standard deduction of Phil :

c) . $ 7,350

The standard deduction for a dependent child is total earned income plus $ 350, up-to maximum of $ 12,200.

Earned income is the money we earn from working, i. e. Wages $ 7,000.

So, standard deduction for Phil is $ 7,000 + $ 350 = $ 7,350