Frank,age 17,received $4,000 of dividends and $1,500 from a part-time job.Frank is a dependent of his parents who are in the 28% percent bracket.Frank's taxable income is
A)$0.
B)$4,000.
C)$4,500.
D)$3,650.

Question

Quizplus · Accepted Answer

Since Frank is a dependent of his parents, his standard deduction is $1,100 for 2021.

His taxable income can be calculated as follows:

Dividends: $4,000 
Part-time job: $1,500

Total income: $5,500

Minus standard deduction: -$1,100

Taxable income: $4,400

Since Frank's taxable income falls in the 10% tax bracket for 2021, his tax liability would be:

10% of ($4,400 - $0) = $440

However, since Frank's parents are in the 28% tax bracket, they may be able to claim the qualified dividend and capital gain tax worksheet and use their own tax rate to calculate Frank's tax liability on the $4,000 of dividends.

Assuming their tax rate is indeed 28%, Frank's tax liability on the dividends would be:

28% of $4,000 = $1,120

Therefore, Frank's total tax liability would be:

$440 (from his own income) + $1,120 (from his dividends) = $1,560

So, even though Frank's taxable income is technically $4,400, his total tax liability is $1,560, which is less than his total income of $5,500.

Thus, the correct answer is D) $3,650.

Frank,age 17,received $4,000 of Dividends and $1,500 from a Part-Time