@AmeliesUncle
Your answer is not “no”, but “also”.
It is almost certainly true that if the child withdraws money to pay tuition (the purpose of the taxpayer’s question), the child will owe capital gains tax on some amount of gains.
It is also true that money held in a brokerage account will incur annual taxes for dividends, interest, and possibly capital gains, depending on what assets are held and traded. And I agree that the first $1100 of any income generated annually will be tax free, with the rest taxable to the child.
Ultimate point being, a 529 account grows tax-free and can be withdrawn tax-free for tuition, but there are limits and penalties if it is withdrawn for other reasons. A brokerage account will incur annual taxes and additional taxes when cashing out, but there are no rules or limitations governing how the money must be spent when it is cashed out.
