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CFP® Practice Question: Taxation at Parents’ Marginal Rate

Jennifer and Ben have been extremely successful in transferring some of their money to their children over the past several years. The following events took place in the current year:

  • Jan, age 13, earned $1,300 in interest.
  • Bill, age 20 and NOT a student, earned $2,500 in dividends, interest, and capital gains and $1,800 working at a golf course.
  • Ted, age 16, earned $2,900 in dividends and interest and $1,600 mowing lawns.
  • Marci, age 11, earned $2,900 in dividends and interest and $1,700 as a child model.

Which of the children have income that is partially subject to taxation at their parents’ marginal rate?

A.  Bill, Ted and Marci
B.  Ted and Marci
C.  Marci only
D.  Jan and Ted
E.  Ted only