I had a previous post regarding if I was required to attach my childrens 1099 for their custodial to my return or if I would need to file their own seperate return and it sounded like as long as their unearned income was less than $1,100 and they didn't have earned income that I didn't need to do anything.
I was doing some more reading and came across this article that stated the following: https://finance.zacks.com/pay-capital-gains-taxes-custodial-accounts-10617.html
If your child has enough in savings to trigger kiddie tax liability, you'll be paying his taxes at your rate. With this in mind, filing a separate return for your child just to save a few hundred dollars of taxes on her first couple thousand dollars of income may seem like a big hassle. If you don't want to bother with filing a separate return for her, you may not have to. Generally, as of 2013, as long as your child's total income is less than $9,500 and your child only has income from interest, dividends or capital gains distributions, you can include your child's income on your return. However, if your child has capital gains income from trading assets, as opposed to coming from distributions from mutual funds and other investments, you'll need to file a separate return.
We have our childrens custodials invested in a mutual fund and I was thinking about selling the fund and going to cash for our kids so I don't have to deal with filing returns in the future. When I sell their fund that would be considered a trade or sale and if it wasn't held for a year it would be a short term capital gain I believe. If I hold for over a year that would be a long term capital gain. My question is if I sell that fund does that mean I have to file a return for my child regardless if the earning were less than $1,100 because its considered a trade of assets? They have no earned income and their unearned income is from interest, dividends and distributions from the mutal fund (long and short) but I haven't held the fund for a year yet. Thank you in advance.
