All the following statements concerning the “kiddie-tax” rules are correct EXCEP
ID: 2718696 • Letter: A
Question
All the following statements concerning the “kiddie-tax” rules are correct EXCEPT:
(A) The rules are promulgated to curtail the shifting of income from high-tax-bracket parents to the lower-tax-bracket children.
(B) The rules are limited to trust income received by a child from trusts established by the child’s parents or grandparents.
(C) A standard deduction applies to a portion of the child’s unearned income.
(D) The rules provide for the taxation of a child’s net unearned income at the parent’s highest marginal tax rate.
Provide a detailed explanation for your answer. Only answer if you have a strong estate planning background.
Explanation / Answer
1> For purposes of the marital deduction, all the following are advantages of a power of appointment trust except probate of trust corpus can be avoided at the surviving spouse’s death. This does not solve the purpose. It does not corelate to the advantage of a power of appointment trust.
2> All of the following statements concerning a Section 6166 installment payment of estate taxes attributable to the inclusion of a closely held business in a decedent’s gross estate are correct except the estate’s personal representative has the sole discretion to elect a deferral of the estate tax payments. It does not include in the section because there is difference in the execution of the work under the same. There is complete time bound contract to which the person has to follow without any hault.
3> All the following statements concerning the “kiddie-tax” rules are correct except a standard deduction applies to a portion of the child’s unearned income. There is investment made to which tax is not incured.