Question

In 2019, Simon, age 12, has interest income of $900 and dividend income of $4,000. He...

In 2019, Simon, age 12, has interest income of $900 and dividend income of $4,000. He has no investment expenses. Determine Simon's net unearned income and total tax liability.

Click here to access the 2019 tax rate schedule and 2019 Estate and Trust Tax Rate Schedule. If required, round the tax liability the nearest dollar.

Net unearned income is $.
Simon's total tax is $.
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Answer #1

Kiddie tax is applicable as Simon has Unearned Income of more than $2,200. Therefore, the amount above it will be taxed.

Total Unearned income in the given case = $900+$4,000= $4,900.

Standard Deduction = $2,200

Net unearned Income = Total unearned income - Standard deduction

= $4,900 - $2,200

= $2,700.

Total Tax payable by Simon

10% of taxable income up to $2,550 = 10% of $2,550 =$255

24% of the taxable income over $2,550 = ( $2,700 - $2,550 ) * 24% =$36

Tax payable by Simon =$255 + $36 = $291.

Total tax payable by Simon (after rounding off) = $290.

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