Question

James and Judy have one dependent child, John, who is 12. In 2019, John received $3,500 of interest income and has no earned income. John has net unearned income of:

a.$0.
b.$2,400.
c.$1,400.
d.$1,300.
e.$3,500.

Answer 1

John's net unearned income, considering the tax standard deduction for a dependent child, is $2,400. For Susan and Jonathan, decision tables and diagrams would illustrate the trade-off between labor and leisure, the impact of government support reductions due to earned income, and how these programs influence work incentives.

Step-by-step explanation:

The student is asking about net unearned income for a child named John who received $3,500 of interest income. According to the tax rules, a dependent child's standard deduction for unearned income is $1,100. Therefore, John's net unearned income is the interest income minus this standard deduction, which is $2,400 ($3,500 - $1,100).

To address the series of questions regarding Susan's and Jonathan's labor and government benefits decisions, a thorough understanding of the impact of income on government support is required, including how the withdrawal of government benefits can affect one's decision to work. Decision tables that consider hours worked, earnings from work, diminishing government benefits, and overall income can provide insights into the incentives or disincentives to work created by assistance programs.

Answering these questions involves knowledge of income effect, substitution effect, and the potential opportunity costs such as child care and transportation expenses that may influence an individual's willingness to work additional hours.