The Nelsons make gifts of appreciated securities to their dependent daughter (age 20) and son (age 21), both of which are students. If the children sell the securities shortly thereafter, the kiddie tax will not apply to tax the gain at the parents' tax rate.

Question

Quizplus · Accepted Answer

The kiddie tax applies to children under the age of 19 or full-time students under the age of 24 who have unearned income in excess of a certain threshold. Therefore, if the Nelsons' children are over the age of 18 and have unearned income from the sale of appreciated securities gifted to them by their parents, the kiddie tax may still apply to tax the gain at their parents' tax rate.

The Nelsons Make Gifts of Appreciated Securities to Their Dependent