text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as ``Taxation of Minor Children Simplifcation 
  Act of 2004''.
  
  SEC. 2. TAXATION OF MINOR CHILDREN.
  
      (a) Application of Trust Rate Schedule to Net Unearned Income of 
  Minor Children.--Subsection (g) of section 1 of the Internal Revenue 
  Code of 1986 (relating to certain unearned income of minor children 
  taxed as if parent's income) is amended--
              (1) by striking paragraphs (1), (3), and (5),
              (2) by redesignating paragraphs (4), (6), and (7) as 
          paragraphs (3), (4), and (5), respectively, and
              (3) by inserting before paragraph (2) the following new 
          paragraph:
              ``(1) In general.--In the case of a child to whom this 
          subsection applies, the tax imposed by this section shall be 
          the sum of--
                      ``(A) a tax computed at the rates and in the same 
                  manner as if this subsection had not been enacted on 
                  taxable income reduced by net unearned income, plus
                      ``(B) the excess (if any) of the tax determined 
                  under subsection (e) on total taxable income over the 
                  tax determined under subsection (e) on taxable income 
                  reduced by net unearned income.''.
      (b) Expansion of Parental Election.--Paragraph (5) of section 1(g) 
  of such Code (as redesignated under subsection (a)) is amended to read 
  as follows:
              ``(5) Election to claim income of child on parent's 
          return.--
                      ``(A) In general.--If the parent of any child to 
                  whom this subsection applies elects the application of 
                  subparagraph (B), such child--
                              ``(i) shall be treated (other than for 
                          purposes of this paragraph)--
                                      ``(I) as having no gross income for 
                                  such year, and
                                      ``(II) as not being entitled to any 
                                  deductions or credits for such year, 
                                  and
                              ``(ii) shall not be required to file a 
                          return under section 6012 for such year.
                      ``(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 shall be included in 
                          such parent's gross income for the taxable 
                          year,
                              ``(ii) the deductions to which such child 
                          would be entitled without regard to such 
                          election shall be allowed to such parent but 
                          only to the extent the aggregate of such 
                          deductions does not exceed the gross income of 
                          such child,
                              ``(iii) any estimated tax payment, and any 
                          amount which has been deducted and withheld 
                          under chapter 24, for such year that is made in 
                          the name and TIN of such child shall be treated 
                          as an estimated tax payment or as an amount 
                          deducted and withheld in the name and TIN of 
                          such parent for such year (including for 
                          purposes of section 31), and
                              ``(iv) 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) Special rule for determining which parent may 
                  make election.--For purposes of this paragraph, the 
                  parent of a child to whom this subsection applies who 
                  may make an election under this paragraph shall be--
                              ``(i) in the case of parents who are not 
                          married (within the meaning of section 7703), 
                          the custodial parent (within the meaning of 
                          section 152(e)) of the child, and
                              ``(ii) in the case of married individuals 
                          filing separately, the individual with the 
                          greater taxable income.
                      ``(D) Carryovers allowed.--Subparagraph (A)(i)(II) 
                  shall not prohibit the carryover of any amount that the 
                  child would be entitled to carryover without regard to 
                  the election under this paragraph.
                      ``(E) Regulations.--The Secretary shall prescribe 
                  such regulations as may be necessary or appropriate to 
                  carry out the purposes of this paragraph.''.
      (c) Conforming Amendment.--The heading for subsection (g) of 
  section 1 of such Code is amended to read as follows:
      ``(g) Treatment of Certain Income of Minor Children.--''.
      (d) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 2004.
target: Taxation of Minor Children Simplification Act of 2004 - Amends the Internal Revenue Code to revise rules for the taxation of the income of minor children (under age 14). Repeals the allocable parental tax rules. Allows parents to elect to claim the child's gross income and deductions on the parents' tax return.
feat_title: To amend the Internal Revenue Code of 1986 to simplify the taxation of minor children.