Ivan Trent,age five,receive $2,900 of dividends per year from a mutual fund he owns;it is his own source of taxable income.Ivan's parents plan to gift a corporate bond they currently own to him.The bond pays $2,100 of interest income per year.The Trent family overall will save taxes if the bond is transferred to the child.

Question

Quizplus · Accepted Answer

The "kiddie tax" rules apply to unearned income for children under 19 (or under 24 if a full-time student), taxing it at the parent's rate, so transferring the bond to Ivan won't save taxes.

Ivan Trent,age Five,receive $2,900 of Dividends Per Year from a Mutual