Custodial Account

[Gary]

I have a client that has a custodial account for his dependent. He sold stock in the account and received a 1099-B for $900. The capital gain is actually $5. Is there any way I can put this kiddie tax on the clients return? The dependent has no other income other than a few dollars in interest.

Thanks,

Gary

[JCH]

Nope. Not that I know about. 1099-Int and 1099-Div amounts can be reported on the 8814, but not amounts reported on 1099-B. You'll have to file a separate return.

[Jesse]

It's not over $1,700 so you don't need to worry about kiddie tax or am I missing something. But you still need to file for the child if that is what you are trying to avoid - just not taxed at the parents rate.

[Gary]

Thanks

Thanks all. I knew the answer, but was hoping someone would have a work-around. I hate to prepare a return that has no tax liability and have to charge to prepare the return.

Gary

[Snaggletooth]

Free Ride

Gary, I think your kid gets a free ride on this one. Like Jesse, the income is not reportable on ANYONE's return unless it reaches the threshhold.

However, if the total proceeds on the 1099-B are large enough that the threshhold is exceeded, I would file a return in the child's name. The resulting income will not be enough to trigger the kiddie tax.

For example, if the capital gain is only $5, but the selling price was $2000, the IRS will assume $2000 and zero basis unless a return is filed to the contrary. Failure to file will launch an electronic query.

[Gary]

Yes

This is exactly the case I have. The 1099-B has the sale at $900, just above the $850 cutoff. Thus I have to file the return, even though the taxable income is $0.