Taxpayer has a custodian investment account for his 5 years old child. An Form 1099-B (the child's SSN) was issued for that account for 2007. The Form 1099-B reported a few stock transactions in 2007. They resulted in a loss. How should them be reported? Does the child has to file an income tax return?
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File
A return should be filed for the child. The IRS will get a copy of the 1099-B, so they will only see the proceeds of the sale and not the fact it resulted in a loss. If no return is filed, the IRS will assume a zero basis for the stock and calculate the tax due. It would be easier to just file than to try and clear it up later.
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