TRUE or FALSE: Benjamin is a full-time college student at age 21. He lives at home and commutes to a local college for his classes. His only income this year is a capital gain of $9000 from the sale of his SLA stock. Benjamin will be subject to the Kiddie Tax.

Question

TRUE or FALSE:  Benjamin is a full-time college student at age 21. He lives at home and commutes to a local college for his classes. His only income this year is a capital gain of $9000 from the sale of his SLA stock. Benjamin will be subject to the Kiddie Tax.

BlackTom AI · Accepted Answer

Let’s unpack the scenario and the key rule at play here. Benjamin is 21, a full-time college student, lives at home, and has unearned income of $9,000 from selling stock. The Kiddie Tax applies to a dependent child’s unearned income. A child can be considered a dependent (qualifying child) for Kiddie Tax purposes if they are under 24 years old, a full-time student, and live at home, provided they meet the other dependency tests.

Option A: True. This would be the correct interpretation because Benjamin is under 24, a full-time student, and his only income is unearned (capital gains). Under the Kiddie Tax rules, such unearned income is taxed at the parent's marginal tax rate, not the child’s rates, subject to the applicable thresholds. The fact that the income is a capital gain does not remove it from the Kiddie Tax framework; it is still unearned income as defined for this purpose.

Option B: False. This would be incorrect because the stated facts align with the Kiddie Tax criteria: he is a dependent-qualifying child (age under 24, full-time student) and has unearned income in excess of typical thresholds. The assertion in this option would misread the dependency status or the applicability of Kiddie Tax for a qualifying student dependent.

A few subtle points to consider when evaluating such questions: the ownership of the stock and the source of income do not negate Kiddie Tax applicability; the critical factors are age, student status, and dependency. If any of these criteria were not met (for example, if he were not a full-time student or were not a dependent), the Kiddie Tax might not apply, and the taxation would follow different rules. In this case, the conditions described support Kiddie Tax applicability, making the statement true.

TRUE or FALSE: Benjamin is a full-time college student at age 21. He lives at home and commutes to a local college for his classes. His only income this year is a capital gain of $9000 from the sale of his SLA stock. Benjamin will be subject to the Kiddie Tax.

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