Question

The kiddie tax provision taxes a certain amount of a child's net (1) income at the higher rates normally used for trusts and estates.

a) Unearned
b) Earned
c) Taxable
d) Gross

Answer 1

The kiddie tax provision taxes unearned income at higher rates normally used for trusts and estates.

Step-by-step explanation:

The kiddie tax provision taxes (a) unearned income at the higher rates normally used for trusts and estates. The kiddie tax was introduced to prevent parents from shifting investment income to their children to take advantage of their lower tax rates. Unearned income includes things like investment income, such as interest, dividends, and capital gains.