Ivan Trent,age five,receive $2,900 of dividends per year from a mutual fund he owns; it is his only 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 child is subject to kiddie tax because he already receives investment income in excess of the $2,100 threshold.The tax on the interest income from the bond owned by the child will still be taxed at the parents' tax rate.

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