Q. Who pays the kiddie tax on capital gains on a UTMA, the custodian on the account or the parent claiming the child as a dependent?
A. Neither. The child pays the tax, and has to file his own tax return, if the amount is more than $1100.
There's one possible exception. If the capital gain is not from the sale of securities, but only a capital gain distribution from box 2a of a form 1099-Div, there is a provision for entering it on the parent's return, using form 8814. Enter at Less common income / Child's income.
But, it is usually best for him to file a separate return, as qualified dividends and capital gain distributions could be taxed at a higher rate on the parent's return.
