Final answer:
The kiddie tax applies to the unearned income of dependent children.
Step-by-step explanation:
The statement is true.
The kiddie tax is a tax law in the United States that applies to the unearned income of dependent children. The purpose of the kiddie tax is to prevent parents from shifting their investment income to their children who may be subject to lower tax rates. Under the kiddie tax rules, unearned income above a certain threshold is taxed at the parents' tax rate, rather than the child's rate. The threshold depends on the child's age and whether they are a full-time student. This tax provision helps ensure that children pay their fair share of taxes on unearned income.