Identify Which of the Following Statements Is True

Identify which of the following statements is true.

A) Valid family partnership partners may be subject to the "kiddie tax."
B) Bob gives his 16- year- old daughter Michelle a 20% capital and profits interest in his accounting practice. She does no work for the partnership and is not involved at all with the operations of the partnership. In fact, she does not know that her dad transferred the interest in the partnership to her. If the partnership allocates an $8,000 distributive share of ordinary income to her, it is properly reported on Michelle's individual tax return.
C) Joan gives her daughter, Sarah, a 25% interest in a partnership that operates a steel mill. Sarah, age 19, was allocated $20,000 from the partnership as her share of the partnership ordinary income. The IRS will require the income to be included on Sarah's return.
D) All of the above are false.

Correct Answer:

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