Question

Child's lower; dependent's higher; parent's lower.
Problem 6-7 Unearned Income of Minor Children and Certain Students (LO 6.4) What is the purpose of the provision in the tax law that taxes unearned income of certain minor children at the trust and estate tax rates? from transferring generally to in order to take The provision is designed to prevent advantage of the tax rate.
answer: Schedule A, Form 2106, Form 8615

Answer 1

1. The purpose of kiddie tax is as follows :

The provision is designed to prevent parents from transferring investments generally to children in order to take advantage of the lower tax rate.

2. Two different ways in which kiddie tax can be reported :

The kiddie tax may be computed on Form 8615 which is attached to Form 1040 tax return. Alternatively, parents may elect to include their income by attaching Form 8814. To make this election, the child's unearned income must be more than $ 2,100 and less than $ 10,500.