Uniform Gift to Minor's Act


F

FreddieFarkle

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?
 
J

joetaxpayer

FreddieFarkle said:
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?
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.
JOE
 
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R

Rich Carreiro

FreddieFarkle said:
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?
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.
 
M

Mark Bole

FreddieFarkle said:
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?
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
 
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R

removeps-groups

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.
This is an important consideration for the hope and lifetime credit as
well.
 

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