Question

Exercise 9-6 (Algorithmic) (LO. 6)

In 2019, Simon, age 12, has interest income of $6,780 and no earned income. He has no investment expenses.

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

Income Tax Rates—Estates and Trusts

Taxable Income

Over—

$0 2,600 9,300 12,750

Taxable Income Over—

$0 2,550 9,150 12,500

Tax Year 2019

The Tax Is:

But not
Over— Over—

$2,600 10%

$0 2,600 9,300 12,750

Net unearned income is	4580
Simon's total tax is

Answer 1

Total Interest Income of SImon for 2019 = $6780

Interest Income is Called Unearned Income for chikd because that income does not come from any employment.

No tax to be paid for unearned income up to $2200 in 2019.

So, Net Unearned income = ( $6780 - $2200) = $4580

Calculation of Simon's Total Tax

Net Unearned Income	Tax Rate	Tax Amount	Calculation
Upto $2600	10%	$260	=2600*10/100
$2601 - $4580	24%	$475	=(4580-2600)*24/100
Simon's Total Tax	$735

Workings

Tax Slab 2019

Slab Amount	Tax Rate
$0 - $2600	10%
$2601 - $9300	24%
$9301 - $12750	35%
Above $12750	37%