I have a client who has a dependent age 14. In 2006 my client sold stock in the child's UTMA account, resulting in a 50K capital gain. This resulted in a 2006 state tax liability of $3,250, paid in 2007. For 2007 the child has only interest and dividends of $3,000. Can the child take the $3,250 state tax payment as an itemized deduction, wiping out the 2007 federal tax liability? Or are there kiddie tax consequences I'm missing. I've never had a child itemize, and I'm wondering if I'm missing something. Thanks.
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