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Ugma tax informartion request
Old 07-05-2013, 12:25 PM   #1
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Ugma tax informartion request

Hi I am Arthur Bellusci and I would like to get tax information on approx. $9000.00 capital gains in an UGMA account. Who pays the tax on the gain the Custodian (ME) or the child?
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Old 07-05-2013, 12:37 PM   #2
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See this: UGMA & UTMA Custodial Accounts

Quote:
The income from a custodial account must be reported on the child's tax return and is taxed at the child's rate, subject to the Kiddie Tax rules. The parent is responsible for filing an income tax return on behalf of the child. There is no special tax treatment for UGMA accounts. Children aged 14 and older must sign their own tax returns.
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Old 07-05-2013, 03:59 PM   #3
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The child. Also, the Social Security number associated with the account should be the child's, not yours. The financial institution will report the gain to the IRS as being earned by the child and the IRS will look to see that the gain is reported on the child's tax return.

P.S. Better not to share names here - remain incognito.
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Old 07-06-2013, 10:50 PM   #4
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If you're planning on using financial aid, gift that money back to yourself when the kid is in 11th grade. If left in the childs name, it gets hit real hard in the fafsa calculations.
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Old 07-06-2013, 11:22 PM   #5
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Beware the kiddie tax that REWahoo's source referred to. Any investment income by a minor above a certain level is taxed at the parent's rate. So the tax return is filed on behalf of the child, but it may be at your rate.

I'd also be careful about trying to transfer that money back. It may be possible, but it's meant to be a one-way transfer.

fairmark.com may be a better source than this board. UGMA & UTMA Custodial Accounts for Minors
Tax programs such as TurboTax probably also cover the tax question, and so should a professional preparer.
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Old 07-07-2013, 01:56 PM   #6
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You can also file form 8814 to include the child's passive income on the parents tax return instead of filing a separate tax return. Your choice
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Old 07-07-2013, 03:30 PM   #7
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You can also file form 8814 to include the child's passive income on the parents tax return instead of filing a separate tax return. Your choice
But not recommended. Form 8814 will increase your modified adjusted gross income and may make you less eligible for some tax credits. How that would effect you would depend on many, many other factors. Your child may also need to file a separate state income tax return.

And you need to report all the child's income (if any), not just the cap gains.
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