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 about trading assets:
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.
