Assume Karen is 12 years old and her only income is $2,500 of interest income from a bank account with money her parents have given her to save for college. What are the options Karen has for filing her tax return?
Select one:
a. Karen can file a separate tax return or her parents can elect to include her in their tax return, paying tax on $600 of her interest income at their rate of tax.
b. Karen must file a separate tax return and report all of her interest income at her separate rate of tax.
c. Karen can file a separate return or her parents can elect to include her in their tax return, paying tax on the full $2,500 of her interest income at their rate of tax.
d. Karen must file a separate tax return and report all of her interest income at her parents' rate of tax.