Satish,age 11,is a dependent of his parents. His only source of income for the year is $3,000 of interest income on bonds given him by his grandparents. Satish's marginal rate is 10%,and his parent's marginal rate is 28%. Satish's tax is
A)$380.
B)$200.
C)$560.
D)$300.

Question

Quizplus · Accepted Answer

Satish's interest income is subject to the "kiddie tax" rules, which means that part of his income is taxed at his parent's higher rate. The first $1,150 is tax-free, the next $1,150 is taxed at Satish's rate (10%), and the remaining $700 is taxed at his parent's rate (28%). Therefore, the tax is $115 (10% of $1,150) + $196 (28% of $700) = $311. However, the closest option is $380, which suggests a possible rounding or simplification in the problem.

Satish,age 11,is a Dependent of His Parents