Question

21)Katia, age 14, is a dependent of her parents. Her only source of income in 2018 is $7,500 of interest income on bonds given her by her grandparents. Katia's marginal rate is 10%, and her parent's marginal rate is 28%. Katia's tax for 2018 is (kiddie tax rules for 2018)

A) $357.

B) $395.

C) $964.

D) $1,044.

22)Santino, age 14, is a dependent of his parents. During 2018, Santino's earned income from wages is $3,500 and Santino received $4,000 of interest income. The parent's marginal rate is 28% and Santino's marginal rate is 10%. Santino's tax is (kiddie tax rules for 2018)

A) $285.

B) $365.

C) $483.

D) None of the above.

24)Chen, a single taxpayer, had the following income and deductions during 2018:

Salary                                                    $55,000

Interest on bank account                               750

Tax-exempt interest                                      500

Deduction for AGI                                     5,500

Itemized deductions                                15,000

Taxes withheld                                         5,500

Calculate Chen's tax liability due or refund.

1. $1,010.50 tax liability.
2. $1,010.50 refund.
3. $705.50 tax liability.

          D)    $705.50 refund.

Answer 1

21	The answer is D- $1044
							Amount($)
	Workings
	Katia's unearned income						7,500
	Standard deduction						1,050
	Taxable Income						6,450
	Taxes thereon
	First $1050 of the above taxed at the kids tax rate				10% on 1050		105
	The rest $5400 ( 6450 - 1050) is taxed at the slabs for trust and estate rates
					10% on $ 0 to 2550		255
					24% on $ 2551 to 9150		684
							1,044
22	The answer is B- $365
							Amount($)
	Workings
	Santino's unearned income						4,000
	Standard deduction (earned income plus $350)						3,850
	Taxable Income						150
	Taxes thereon
	First $1050 of the above taxed at the kids tax rate				10% on 150		15
	The earned income will be taxed at her marginal rates
					10% on $3500		350
							365
	Note for both answer 21 and 22
	After the new tax reforms brought in by Tax cuts and Jobs Act 2018 the parents marginal rate is not used in computing the
	child's unearned income. The rates prescribed in the slab for trusts and estates are used instead.
24	Income computation for Chen
	Salary Income						55,000
	Interest on Bank Account						750
	Tax exempt interest						-
	Total Gross Income						55,750
	Adjustments
	Deduction for AGI						5,500
	Adjusted Gross Income						50,250
Less	Standard deduction				12,000
	Itemized deductions				15,000		15,000	Higher of the two
	Taxable Income						35,250
				10%	0- 9525		953
				12%	9526 -38700		3,087
	Taxes payable						4,040
	Taxes withheld						5,500
	Net amount liability / (refund)						(1,461)
	The options provided in the answer seems incorrect. The correct answer should be $1,461 refund
	Please recheck with your instructor