In which of the following circumstances will income of the child be taxed at the marginal tax rate of the child's parent?
I.Nicole,age 17,has $4,000 of interest income from Microsoft bonds.
II.Catherine,age 19,has $2,300 of royalty income from oil producing property.

Question

In which of the following circumstances will income of the child be taxed at the marginal tax rate of the child's parent?
I.Nicole,age 17,has $4,000 of interest income from Microsoft bonds.
II.Catherine,age 19,has $2,300 of royalty income from oil producing property.
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Quizplus · Accepted Answer

The income of a child under the age of 19 (or under 24 if a full-time student) is typically subject to the kiddie tax rule. This means that any unearned income (such as interest or royalty income) over a certain amount (currently $2,200 for 2021) is taxed at the parent's marginal tax rate. Therefore, Nicole's interest income would be subject to the kiddie tax and taxed at her parent's marginal tax rate. Catherine, however, is over the age limit for the kiddie tax rule to apply, so her royalty income would be taxed at her own marginal tax rate.

In Which of the Following Circumstances Will Income of the Child