In 2017, Carson is claimed as a dependent on his parent\'s tax return. His paren

Question

In 2017, Carson is claimed as a dependent on his parent's tax return. His parents' ordinary income marginal tax rate is 28 percent. Carson's parents provided most of his support.

What is Carson's tax liability for the year in each of the following alternative circumstances?

A. Carson is 17 years old at year-end and earned $9,900 from his summer job and part-time job after school. This was his only source of income.

B. Carson is 23 years old at year-end. He is a full-time student and earned $9,900 from his summer internship and part-time job. He also received $4,700 of qualified dividend income.

2017 Tax Rate Schedule Schedule X-Single Schedule Z-Head of Household If taxable income is over: If taxable income is over. But not But not over: $ 13,350 $ 50,800 over The tax is: The tax is: 10% of taxable income $ 1 ,335.00 plus 1 5% of the excess over $13,350 $6,952.50 plus 25% of the excess over $50,800 $27,052.50 plus 28% of the excess over $131,200 $49,816.50 plus 33% of the excess over $212,500 $117,202.50 plus 35% of the excess over $416,700 $ 1 26,950.00 plus 39.6% of the excess over $444,550 $ 10% of taxable income $932.50 plus 15% of the excess over $9,325 $5.226.25 plus 25% of the excess over $37,950 $ 1 8.7 13.75 plus 28% of the excess aver $91,900 $ 46,643.75 plus 33% of the excess over $191,650 $ 1 2091 0.25 plus 35% of the excess over $416,700 $12 1,505.25 plus 39.6% of the excess cver $418,400 0 9,325 0 $ 9,325 $37,950 $ 9 1 ,900 $ 1 9 1 ,650 $41 6,700 $418,400 $ 37,950 $ 91,900 $ 1 9 1 ,650 $41 6,700 $41 8,400 $ 13,350 $ 50,800 $ 1 3 1,200 $212,500 $416,700 $444,550 $ 1 3 1,200 $21 2,500 $416,700 $444,550 Schedule Y-1-Married Flling Jointly or Qualifying Widow(er) Schedule Y-2-Married Filing Separately If taxable income is over. But not If taxable income is over: But not over: The tax is: over: The tax is: 0 $ 9,325 10% of taxable income $ 1.865.00 plus 1 5% of the excess over $18,650 $ 10.452.50 plus 25% of the excess over $75,900 $29,752.50 plus 28% of the excess over $153,100 $52.222.50 plus 33% of the excess cver $233,350 $112,728.00 plus 35% of the excess aver $416,700 $13 1 ,628.00 plus 39.6% of the excess over $470,700 $ 9,325 $ 37,950 $ 76,550 $116,675 $208,350 $235,350 $ 37,950 $ 76,550 $116,675 $208,350 $235,350 10% of taxable income $932.50 plus 15% of the excess over $9,325 $5,226.25 plus 25% of the excess over $37,950 $14,876.25 plus 28% of the excess over $76,550 $26,1 11.25 plus 33% of the excess over $116,675 $56,364.00 plus 35% of the excess over $208,350 $65,814.00 plus 39.6% of the excess over $235,350 0 $ 18,650 $ 18,650 $ 75,900 $153,100 $233,350 $416,700 $470,700 $ 75,900 $153,100 $233,350 $416,700 $470,700

Explanation / Answer

Part A Carson income will be taxed at his parents ordinary income marginal tax as he is dependent @ 28% Tax Payable (9900*28%) = 2772 Part B Tax on Carson income of 9900 will be 932.5+(9900-9325)*15% = 1018.75 Dividend income of $4700 will not be taxed because qualified dividend are tax free for individual in a tax bracket of 10-15%

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