Answer:
A. $4,650
B. $1,750
C. $2,900
Explanation:
A. Calculation to determine Terri's taxable income
TAXABLE INCOME
Earned income $3,000
Add Unearned income $5,000
Gross income & AGI $8,000
($3,000+$5,000)
Less: Standard deduction ($3,350)
(Greater of either $3,000 or $1,050 income earned +$350)
Taxable income $4,650
($8,000-$3,350)
Therefore Terri's taxable income is $4,650
b. Calculation to determine How much of Terri's income is taxed at her rate
TAXED AT TERRI'S RATE
Taxable income $4,650
($8,000-$3,350)
Less: amount taxed at parents' rate ($2,900)
($5,000-$2,100)
Taxed at Terri's rate $1,750
Therefore The amount of Terri's income that is taxed at her rate is $1,750
c. Calculation to determine How much is taxed at her parent's rate
TAXED AT PARENTS' RATE:
Net unearned income=$5,000-$2,100
Net unearned income= $2,900
($5,000-$2,100)
Therefore The amount of Terri's income that is taxed at her parent's rate is $2,900
