Question

[The following information applies to the questions displayed below.] In 2018, Carson is claimed as a dependent on his parent's tax return. Carson's parents provided most of his support. What is Carson'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. (Round your final answer to the nearest whole dollar amount.) Carson is 23 years old at year-end. He is a full-time student and earned $15,500 from his summer internship and part-time job. He also received $5,860 of qualified dividend income.

Answer 1

Answer:-

Particulars	Amount
Gross income	= $15,500 + $5,860 = $21,360
Minimum standard deduction	$1,050
Earned income	= 350 + 21,360 = $21,710
Generally, Standard deduction for dependent on another tax return	$6,350
Taxable income	= 21,360 - 6,350 = $15,010
Net unearned income	= [ 5,860 - 2,100 ] = $3,760
Parent's Preferential rate	15%
Kiddle tax	= [ $3,760 ] * 15% = $564
Taxable income taxed at Carson's rate	= $15,010 - $3,760 = $11,250
Preferentiaal income taxed at Carson's tax rate	= 5,860 - 3,760 = $2,100
Tax on ordinary income [ 10% is the ordinary income ]	= [ $11,250 - 2,100 ] * 10% = 9,150 * 10% = $915
Total tax liability	= $915 + $564 = $1,479