Questions -

Q1. Janet, who is 22 years of age, is single and lives with her parents, who are in the 35% tax bracket. During the year, Janet earned wages of $5,500 and received taxable interest income of $5,000. Answer the questions relating to each of the following independent situations.

Assume Janet is a full-time student.

• Can Janet's parents claim her as a dependent on their joint return? why not?
• What is Janet's taxable income?
• What is Janet's income tax liability?

Assume Janet is not a full-time student.

• Can Janet's parents claim her as a dependent on their joint return? why not?
• What is Janet's taxable income?
• What is Janet's income tax liability?

Q2. Mr. Mei-Yo Chien is retired. He is married, and the couple have the following sources of income-

• Pension income $12,000
• Taxable distributions from Mr. Chien's 401(k) $15,000
• Taxable interest income $2,000
• Mr. Chien's Social Security benefit $14,000

Mrs. Chien's Social Security benefit $7,000

a. Determine the gross income reported on the Chiens' joint tax return.

b. Without changing your answer to part (a) above, assume that the Chiens also had ?$10,000 interest income on tax-exempt municipal bonds. Would your answer to part (a) above change as a result of this additional source of income? If so, what would their gross income now be?