2008 Kiddie tax and 0% cap gain

[Kram BergGold]

My client's daughter will be a college freshman in September. The child has a lot of UGMA money and the single Mom is subject to AMT. If the child pays for more than 50% of her support she gets to file as single and claim herself as an exemption. However, as the child has no earned income and is a full time college student it appears to me from what I have read that the child is still subject to Kiddie tax thus denying her the 0% bracket for capital gains. Am I correct?
If I am correct, hopefully between the higher standard deduction, the exemption, and the Hope Credit all taxes will be avoided.

[Jesse]

Mark,
If the child pays for more than 50% of her support she gets to file as single and claim herself as an exemption they are not subject to the kiddie tax. Someone jump in and correct me if I'm wrong.

[Kram BergGold]

I found it Jesse

In the NCPE 2007 book and in Lassers it says, in 2008 Kiddie Tax applies to all full time students under age 24 if their earned income does not exceed one half of support.
In NCPE it goes on to define earned income just as we know it to be.
So i had this correct. The law was clearly drafted to prevent college students from getting the zero percent rate.

[S T]

Timely Post

Thanks for the post on this subject, as I just last nite received an email regarding the -0-% on capital gains.

Have a t/p, daughter in college, with investments in her name and social, and I also am unclear on how to treat for tax planning. Daughter will not have earned income, college student and qualifies Mom as HOH and MOM takes dependency exemption.

So ???? No -0-% will end up being the 15%?

Thanks,

Sandy

[erchess]

Maybe this is one more way in which I am strange

but if I had ended my high school years with enough money of my own to live on, I would not have gone to College right away if I had been told that I could save on taxes by waiting until age 24 to enroll. I probably would have traveled the world. I might instead have gotten a job just to have something to do.

[Kram BergGold]

Sandy

In your case, if kid provides own support Mom could lose H of H status. This might be very bad. In mine the Mom has two daughters so won't lose H of H but due to AMT H of H may not even be saving Federal taxes just state.