Detailed Answer
(b) The requirement is to determine George’s taxable
income. George’s adjusted gross income consists of $3,700 of
dividends and $1,700 of wages. Since George is eligible to be
claimed as a dependency exemption by his parents, there will be
no personal exemption on George’s return and his basic standard
deduction is limited to the greater of $950, or George’s earned
income of $1,700, plus $300. Thus, George’s taxable income
would be computed as follows:
Dividends $ 3,700
Wages 1,700
AGI $ 5,400
Exemption 0
Std. deduction (2,000)
Taxable income $ 3,400