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6 January, 09:55

Marcy, age 12, earned $400 from babysitting during 2018. Her parents claim her as a dependent. She also had interest and dividends of $2,600 during the year. She did not itemize deductions.

What is her net unearned income for 2018?

A. $500 B. $2,600 C. $1,550 D. $3,000

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  1. 6 January, 10:53
    0
    The correct answer is A

    Explanation:

    The net unearned Income is stated as under the Section 1 (g) (4),

    Unearned income less the sum of

    1. $1,050 in addition,

    2. the greater of $1,050 or

    if a child itemized, the amount of deductions which is allowable and directly linked with the production of the unearned income.

    So,

    In this case, Marcy unearned income comprise of $2,600 (dividends and interest). Therefore the net unearned income would be:

    = Dividend and Interest - ($1,050 + $1,050)

    = $2,600 - ($1,050 + $1,050)

    = $2,600 - $2,100

    = $500
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