Keith,age 17,is a dependent of his parents.During 2013,he received $3,000 of dividend income.The parent's marginal rate is 28% and Keith's rate is 10%.Keith's tax is

Question

Quizplus · Accepted Answer

Since Keith's tax rate is lower than his parents' marginal rate, it is more beneficial for Keith to report the dividend income on his own tax return rather than having his parents include it on their tax return. Keith's tax on the $3,000 of dividend income would be $300 (10% of $3,000), while if the parents were to include it on their tax return, the tax would be $840 (28% of $3,000). Therefore, Keith's tax is the better choice and the answer is B.

Keith,age 17,is a Dependent of His Parents