Question

Compute Stanley's taxable income for 2017, assuming he has $1,000 in wages from working in a grocery store and $2,200 in interest income from some bonds he owns. Stanley, age 16, is claimed as a dependent on his parents' return.

Answer 1

Stanley's taxable income for 2017 is calculated by adding his wages ($1,000) and interest income ($2,200) for a total income of $3,200. The standard deduction for a dependent is his earned income plus $350, which is $1,350 in this case. Subtracting the standard deduction from his total income, Stanley's taxable income is $1,850.

Step-by-step explanation:

Calculating Stanley's Taxable Income

The question asks us to compute Stanley's taxable income for the year 2017. Stanley is 16 years old and has earned income from two sources: wages from a grocery store job, and interest from bonds. The total earned wages are $1,000 and the interest income is $2,200.

As a dependent, Stanley's standard deduction in 2017 would have been his earned income plus $350, not to exceed the standard deduction for an individual, which was $6,350 in that year. Since $1,000 + $350 = $1,350, which is less than the standard deduction, his deduction is limited to his earned income plus $350. Therefore, we calculate his taxable income as follows:

• Total Income = Wages + Interest = $1,000 + $2,200 = $3,200
• Standard Deduction for Dependents = Earned Income + $350 = $1,000 + $350 = $1,350
• Taxable Income = Total Income - Standard Deduction = $3,200 - $1,350 = $1,850

Stanley's taxable income for 2017 would be $1,850.