Keith,age 17,is a dependent of his parents.During 2016,he received $3,000 of dividend income.The parent's marginal rate is 28% and Keith's rate is 10%.Keith's tax is
A)$292.50.
B)$130
C)$357.
D)None of the above.

Question

Quizplus · Accepted Answer

Keith's dividend income falls in his own tax bracket and is taxed at his own rate of 10%. Therefore, his tax liability would be $300 ($3,000 x 0.10). It does not matter what his parent's marginal tax bracket is since Keith's income is not included in their tax return. So, the correct answer is choice B, $130.

Keith,age 17,is a Dependent of His Parents