ELECTION TO CLAIM CERTAIN UNEARNED INCOME OF CHILD ON PARENT’S RETURN.

SEC. 6006. ELECTION TO CLAIM CERTAIN UNEARNED INCOME OF CHILD ON PARENT’S RETURN. (a) In General.—Subsection (i) of section 1 of the 1986 Code (relating to persons required to make returns of income) is amended by adding at the end thereof the following new paragraph: “(7) Election to claim certain unearned income of child on parent’s return.— “(A) In general.—If— “(i) any child to whom this subsection applies has gross income for the taxable year only from interest and dividends (including Alaska Permanent Fund dividends), “(ii) such gross income is more than $500 and less than $5,000, “(iii) no estimated tax payments for such year are made in the name and TIN of such child, and no amount has been deducted and withheld under section 3406, and “(iv) the parent of such child (as determined under paragraph (5)) elects the application of subparagraph (B), such child shall be treated as having no gross income for such year and shall not be required to file a return under section 6012. “(B) Income included on parent’s return.—In the case of a parent making the election under this paragraph— “(i) the gross income of each child to whom such election applies (to the extent the gross income of such child exceeds $1,000) shall be included in such parent’s gross income for the taxable year, “(ii) the tax imposed by this section for such year with respect to such parent shall be the amount equal to the sum of— “(I) the amount determined under this section after the application of clause (i), plus 102 STAT. 3687 “(II) for each such child, the lesser of $75 or 15 percent of the excess of the gross income of such child over $500, and “(iii) any interest which is an item of tax preference under section 57(a)(5) of the child shall be treated as an item of tax preference of such parent (and not of such child). “(C) Regulations.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph.” (b) Effective Date.—The amendment made by this section shall apply to taxable years beginning after December 31, 1988.