What does Net Unearned Income refer to?

Net Unearned Income typically refers to the unearned income of a child that exceeds a set threshold for tax purposes, often in the context of the "kiddie tax." This provision applies to children under a certain age who have unearned income, such as interest, dividends, or capital gains. If their total unearned income exceeds a specific limit, the excess may be taxed at their parent's tax rate rather than the child's lower tax rate, which is intended to prevent parents from shifting their investments to their children to take advantage of lower tax rates.

This understanding of Net Unearned Income helps clarify how taxes are applied in intergenerational wealth management and the implications for families with investment income in children's names. The other choices relate to types of income but do not specifically deal with the tax implications of unearned income in children as defined by the tax code, which is essential for understanding why the correct answer focuses on the threshold for children’s unearned income.