Question

Tony, age 15, is claimed as a dependent by his grandmother. During 2019, he had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $800. Tony's taxable income is:

a) $1,800.

b) $1,800 - $800 - $1,100 = ($100).

c) $1,800 - $1,150 = $650.

d) $1,800 - $1,100 = $700.

e) None of these.

Answer 1

Tony's taxable income would be $650, calculated by subtracting the standard deduction for a dependent (his earned income of $800 plus $350) from his total income ($1,000 interest income).

Step-by-step explanation:

The question asks to calculate Tony's taxable income based on his earnings and interest income while considering the standard deduction and exemption. Since Tony, at age 15, is a dependent, his income would be subject to different rules compared to an independent taxpayer. He had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $800, which totals $1,800. For a dependent like Tony, the standard deduction in 2019 typically allows him to not pay taxes on his earned income up to $1,100 plus $350. However, since Tony's earned income ($800) is less than this total, he can deduct his entire earned income from his total income. Thus, the standard deduction for him would be $800 plus the $350. His taxable income is the interest income of $1,000 minus the standard deduction of $350 ($800 is deducted from earnings, not interest), making it $650.