Return for minor

Does the child's investment income exceed $850?

Condor

Investment income is less than $850 but K1 trust distribution brings it up to $1500.

Al F.

Child files a full 1040 with 8615. Parents cannot report the child's income on their own return when capital gains are involved.

Ira Smilovitz

The income from the trust should be treated just as it is reported on the K-1, namely interest, dividends, etc. Whether it's reported on a K-1 or a 1099 is irrelevant.

Capital gains *distributions* (from mutual funds) are eligible for the parents' election, actual capital gains from sales of assets on Schedule D are not.

Investment income under $1700 is not subject to "kiddie tax". To keep things simple and also obtain the best tax result in this situation, the child should file his or her own return.

-Mark Bole

Whether the parents can include the kids income in their own return depends on the unearned income of the kid & whether the kid earned any income via a summer job.

However, I have seen quite a few kiddee tax situations where the answer dictating that the kid file his/her own return gets dictated by the state. Frequently, there is not enough income at the state level to generate a tax liability, or the state lets the kid pay tax at its own graduated tax rate schedule.

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