During 2017, Montoya (age 15) received $2,200 from a corporate bond. He also received$600 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Question

Quizplus · Accepted Answer

Montoya's taxable income is calculated as follows:

Interest income from corporate bond = $2,200 
Interest income from savings account = $600

Total income = $2,200 + $600 = $2,800

However, since Montoya is a dependent of his parents and is under age 19 (or 24 if he is a full-time student), his unearned income is subject to the "Kiddie Tax." This means that the first $1,050 of his unearned income is tax-free, the next $1,050 is taxed at his own rate, and any additional income is taxed at his parents' rate.

In this case, $600 of Montoya's income is tax-free, and the remaining $2,200 is subject to the Kiddie Tax. Since $2,200 - $1,050 = $1,150, only $1,050 is taxed at Montoya's rate, and the remaining $1,150 is taxed at his parents' rate.

Therefore, Montoya's taxable income is $1,050 (taxed at his own rate) + $0 (taxed at his parents' rate) = $1,050. Option B is the correct answer.

During 2017, Montoya (Age 15) Received $2,200 from a Corporate