qualifying relative gross income test

AskTaxGuru.com Junior Member, judyannf, asked:

I'm trying to determiine how to figure my son's gross income. (for the purpose of determining if he can be claimed as a dependent) He earned $4175 in wages, $142 in dividends, but had $1265 in long term realized losses from the sale of mutual funds. Do I include the losses in determining his gross income? If I can include the loss, then his income will be below $3650. He meets the other criteria for a qualifying relative.

Does Interest Expense change qualified Dividends?

A forum question by AskTaxGuru.com Junior Member dakotah196 says:

AGI: 98,000

Qualified Dividends from IBM Stock: 3000

Interest Expense associated with purchase of IMB stock: 1000

The question is: Will the taxpayer receive preferential 15% capital gains tax rate on the entire 3000 or on 3000-1000=1000?

Thank you!

Answered by Moderator Wnhough:

The question is: Will the taxpayer receive preferential 15% capital gains tax rate on the entire 3000 or on 3000-1000=1000?”

--->On the whole $3,000, the qualified dividends from IBM stock; Qualified dividends shown in box 1b of the Form 1099-DIV you receive are the ordinary dividends subject to the same 0% or 15% maximum tax rate that applies to net capital gain. You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. You need to file Qualified Dividends and Capital Gain Tax Worksheet on Sch D andeport iton 1040 lineyou’re your investment expense, $1,000, is deductible as miscellaneous itemized deductions on Schedule A of your tax return. When your investment portfolio includes both taxable and tax-exempt securities, you can deduct only those expenses that are related to the taxable securities.

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