In Which of the Following Circumstances Will Income of the Child

question 4

Multiple Choice

In which of the following circumstances will income of the child be taxed at the marginal tax rate of the child's parent?
I.Martin,age 6,earns $14,000 this year by acting in television commercials.
II.Allen,age 22 and a full time college student,has $4,000 of interest income on municipal bonds that he inherited from his grandfather last year.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Federal Income Tax Ramifications

These are the effects or consequences that federal tax laws have on individuals, investments, and business transactions.

Leasing Alternatives

Options available to businesses or individuals for obtaining the use of equipment or property through leasing agreements rather than purchase.

Net Present Value

A financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Present Value

The contemporary valuation of foreseeable future earnings or sequences of cash payments, taking into account a specified interest rate.