Chapter 3 - Problems - Jan 23

Chapter 3 - Problems - Jan 23 - Chapter 3 Problems January...

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Chapter 3 – Problems – January 23rd Problem 40 Wages $ 3,000 Bank interest 1,500 Bond interest (City of Rochester bond interest is tax-exempt) –0– Gross income $ 4,500 Less: Standard deduction* (3,300) Personal exemption** (–0–) Taxable income $ 1,200 b Bank interest $ 1,500 Bond interest –0– Total unearned income $ 1,500 Minus: $850 + $850 standard deduction (1,700) Income taxed at parents’ rate $ –0– Income taxed at Nicole’s rate $ 1,200 Total tax ($1,200 × 10%)*** $ 120 Problem 44 a. Earned income $ 1,400 Interest income 3,200 Gross income and AGI $ 4,600 Less: Standard deduction [greater of $850 or $1,400 (earned income) + $300] (1,700) Taxable income $ 2,900 b. Taxed at parents’ rate: Unearned income 3,200 Less: $850 + $850 (1,700) Net unearned income (taxed at parents’ rate) $ 1,500 Taxed at Rhett’s rate: Taxable income $ 2,900 Less: amount taxed at parents’ rate (1,500) Taxed at Rhett’s rate $ 1,400 c. The parental election cannot be made as Rhett’s income is not solely from interest
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Chapter 3 - Problems - Jan 23 - Chapter 3 Problems January...

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