child's capital gains

Aside from the issue of how this impacts student aid, it looks fine to me. You can't gift a loss, but you can gift appreciated stock and the recipient can use his own losses to offset that gain. JOE

Since these boys are all minors, the stock cannot be held in their names alone -- someone must be named as "trustee" -- if I understand the Uniform Gifts to Minors Act correctly. Probably the mother or father is such trustee. Regardless, the trustee must act in the best interest of the child, not the parents and the money cannot be used to meet parental obligations. It seems to me that a gift to either parent is not in the best interest of the child. I don't know the remedies for prohibited transactions, so I can't tell the full consequences. However, it does seem to me that IRS is likely to ignore such a gift. I also wonder if a broker or transfer agent would make the necessary changes. I wouldn't try this with one of my clients, I don't think. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans

I'm not near my software, but I recall the kiddie tax instructions

Line 5 worksheets that, when filled out asrequested, do combine parents and child's capital gainsincome to tax child's capital gains income at the parent'srates. That being the case, I would assume the kiddie tax does apply parent's rates for capital gains and qualified dividends.

I would not recommend a minor gift or give anything to anyone. But starting in 2008, the kiddie tax will apply to kiddies who have outgrown their minor status buyt still pay kiddie tax. So maybe this could work for them. And as we now know, the writers of the new kiddie tax legislation were farsighted enough to add a clause that changes all instances of "minor" to "child" when applied to kiddie tax.