Q. Is there a way to avoid paying taxes on the entire withdrawal?
A. Yes and No. It's not withdrawing the money that caused the taxable event (a UTMA is not like a 529 plan or an IRA). It was the sale of the investments (stocks or mutual funds) in the account, that caused the taxable event. So, the entire withdrawal is not taxable, only the capital gain on the sale, as shown on form 1099-B. The account may also have taxable income shown on forms 1099-INT and/or 1099-DIV.
Q. How to avoid paying taxes on the returned amount again when removed in the future?
A. When you put the money back, you probably bought more shares. Those shares have a new cost basis that you need to keep track of (the account administrator/broker usually does this for you.)
