Kiddy Tax

[Bjorn]

Facts:
Very wealthy adult but normal taxable income < 100k
8 year old child.

The 8 year old child is going to sell some of her stocks and buy mutual funds. The gain may be about 15,000.00.

Does the kitty tax trump the favorable capital gain rates?? My concern is will the IRS take away the 15% bracket on the young child.

Thanks.

[Bees Knees]

Capital gain tax rates still apply even at the parent's rate. The only difference is that instead of getting 5% on LTCG because the child may have only been in the 10% or 15% bracket, you now have the LTCG taxed at 15% because the parent is in a 25% or higher bracket.