Uniform Gift to Minor's Act

Discussion in 'Tax' started by FreddieFarkle, Mar 17, 2008.

  1. I established a mutual fund in my name as custodian for my son under
    the UGMA. My son turned 21 in tax year 2007. In that year I told
    several withdrawals from the UGMA mutual fund to pay some of his
    college tuition. The mutual fund gave me, of course, a 1099. My son
    has little income (summer work mainly) so I would like it to go on his
    tax return. I will be treating him as a dependent on my tax return.
    Where should the distribution from the mutual fund go?
    FreddieFarkle, Mar 17, 2008
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  2. FreddieFarkle

    joetaxpayer Guest

    It goes on Sch D of whoever's social security number is on the 1099.
    You were custodian, but it's his SS# that should have been on any tax
    reporting documents the account issued. If your number is on the
    account, it would send a red flag if you do not claim on your tax return.
    joetaxpayer, Mar 17, 2008
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  3. Not only *can* it go on his return, it *must* go on
    his return:
    (1) The money is his, even if he were under 21 (or under 18
    for that matter).
    (2) If he's old enough that the kiddie-tax rules don't apply,
    that alone means it goes on his return.
    (3) Even if the kiddie-tax rules do apply (which I suppose they
    will for him in 2008, though not in 2007), gain/loss
    from sales of securities can only be reported on the
    owner's tax return. The election to report on the
    parent's return is only an option when the investment
    income is solely interest, dividends, or cap gain
    distributions. Since there was a sale of securities,
    the election is not allowed, and it must be reported
    on his return.
    Rich Carreiro, Mar 17, 2008
  4. FreddieFarkle

    Mark Bole Guest

    In addition to Joe's information, be sure your son actually is your
    dependent. Depending on his tuition (and room/board, if he is living
    on-campus), which is part of his overall cost of support, and the amount
    that he is paying (more than half?) out of his own funds (what used to
    be in the UGMA), he may not meet the test to be your dependent.

    BTW, it's not an UGMA anymore since he is not a minor. It would be a
    parental favor to a 21-yr old college student to help him understand
    what his money is invested in and what the tax consequences are when he
    sells those investments, since right now it sounds like you are still
    handling these things for him.

    -Mark Bole
    Mark Bole, Mar 17, 2008
  5. This is an important consideration for the hope and lifetime credit as
    removeps-groups, Mar 17, 2008
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