Question

In 2022, Sheryl is claimed as a dependent on her parents' tax return. Her parents report taxable income of $550,000 (married filing jointly). Sheryl did not provide more than half her own support. What is Sheryl's tax liability for the year in each of the following alternative circumstances? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates for reference. Note: Leave no answer blank. Enter zero if applicable. Required: a. She received $7,000 from a part-time job. This was her only source of income. She is 16 years old at year-end. b. She received $7,000 of interest income from corporate bonds she received several years ago. This is her only source of income. She is 16 years old at year-end. c. She received $7,000 of interest income from corporate bonds she received several years ago. This is her only source of income. She is 20 years old at year-end and is a full-time student. d. She received $7,000 of qualified dividend income. This is her only source of income. She is 16 years old at year-end.

Answer 1

In scenario a, Sheryl's tax liability would be $0 as her income falls below the standard deduction amount for dependents. In scenarios b and c, her tax liability would also be $0 since her income is still below the standard deduction amount. In scenario d, her tax liability on qualified dividends would be $0 as they are taxed at a lower rate.

Step-by-step explanation:

To determine Sheryl's tax liability for the year in each of the given scenarios, we need to calculate her taxable income and then use the appropriate tax rates.

a. In scenario a, Sheryl received $7,000 from a part-time job, which is her only source of income. Since she is 16 years old, she is subject to the dependent filing status. Her tax liability would be $0 because her income falls below the standard deduction amount for dependents.

b. In scenario b, Sheryl received $7,000 of interest income from corporate bonds, which is her only source of income. Again, as a 16-year-old dependent, her tax liability would be $0 since her income is below the standard deduction amount.

c. In scenario c, Sheryl received $7,000 of interest income from corporate bonds, which is her only source of income. However, she is now 20 years old and a full-time student. As a non-dependent, her tax liability would be $0 because her income falls below the standard deduction amount.

d. In scenario d, Sheryl received $7,000 of qualified dividend income, which is her only source of income. As a 16-year-old dependent, her tax liability on qualified dividends would be $0 because qualified dividends are taxed at a lower rate.

Answer 2

Sheryl's tax liability depends on her age, income source, and amount earned. If she is 16 years old and her income is from a part-time job or interest income, her tax liability is $0. However, if she is 20 years old and a full-time student, her tax liability would depend on her taxable income. In the fourth scenario, if her income is from qualified dividends and she is 16 years old, her tax liability is $0.

Step-by-step explanation:

To determine Sheryl's tax liability in each of the alternative circumstances, we need to use the Tax Rate Schedule and the Dividends and Capital Gains Tax Rates. Let's calculate her tax liability for each scenario:

a. Sheryl received $7,000 from a part-time job. Since this is her only source of income and she is 16 years old, her tax liability is $0 because her income falls below the taxable threshold.

b. Sheryl received $7,000 of interest income from corporate bonds. Again, this is her only source of income and she is 16 years old, so her tax liability is $0.

c. Sheryl received $7,000 of interest income from corporate bonds. However, she is now 20 years old and a full-time student. According to the Tax Rate Schedule, her taxable income is $7,000. Her tax liability would be calculated based on the tax rates and brackets applicable to her income level.

d. Sheryl received $7,000 of qualified dividend income. Similar to the previous scenarios, her tax liability is $0 because her income falls below the taxable threshold and she is 16 years old.