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

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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