The income shifting tax strategy is least effective when income producing gifts are given to persons

Question

Quizplus · Accepted Answer

The income shifting tax strategy is least effective when income producing gifts are given to persons under age 14 because they are subject to the "kiddie tax." The kiddie tax taxes a child's unearned income at the parent's tax rate if the child's unearned income exceeds a certain amount ($2,200 in 2021). Therefore, giving income producing gifts to children under age 14 would not result in any tax savings because the child's unearned income would be taxed at the parent's rate.

The Income Shifting Tax Strategy Is Least Effective When Income