Question

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

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.)

Note: use appropriate schedule to get tax liability. Make sure the answer given is correct because this question asked to Chegg every year (just tax schedule change), but the Chegg did not provide correct answer from 2016 to now also some people sent this question 2019 but answer still wrong. whoever work on this question please make sure answer is correct need and help let me know or get answer send it to me as a comment I will put in system and inform you either answer is right or wrong.

Thank you.

Answer 1

A child who is dependent on his or her parents and have some income during the year is required to report such income by filling a return if income of he or she crossed the limit decided by the law.

For the purpose of this the taxable income of a child can be segregated  into two type:

1. Earned income- income which is acquired by doing some work activity.(exempted limit $12200 per year)
2. Unearned income- income which is acquired in form of interest or dividend income on investments.(limit $1100 per year)

If the child who is dependent on parents and have some income over and above the limits then he or she must report such income.

The Child is dependent means he or she is getting financial support from parents at least half or more then half of the total annual expenditure of living.and also live with the parents at least half of the year and under the age of 19, and also required to file return then he/she can use the kiddie Tax rate for computing income tax liability for the year.

If Children is not have a status of dependent children then he or she required to file return as an adult one.

Hence benefit of dependent status gives him/her to use the KIDDIE TAX RATE for unearned income.

Now come to the problem given:

Sheryl who is age of 16 year and dependent on his parent, have only Unearned income or $7000 during the year. As she is not have any earned income hence she has two option to report such income either by filling her own return or can report such income by including in her any one parents return.

So whether to Report such income or not and whether the benefit of kiddie tax rate is allowed or not fallowing condition are summarized:

1. Have only unearned income during the year.
2. Income total exceeds the limit exempted $1100
3. Dependent of her parents
4. Under the age of 19 year.

All the above four condition are satisfied by the Sheryl hence she should report such income and can use the kiddie tax rate.

Also as she has only unearned income then she can report such income through her parent return also.

The Kiddie Tax Rate:

Kiddie Taxable Unearned Income

Taxable Income	Tax rate
Up to $2600	10%
$2601-$9300	24%
$9301-$12750	35%
$12751- above	37%

The Tax Liability of Sheryl is:

Total Unearned Income	$7000
Less; Exempted	($1100)
Taxable income	$5900
Tax Theron@24%	$1416/-