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purplecat
Returning Member

Child Short-term capital gains (over 1100)

My child's only income is short-term capital gains that's over 1100.

Does this mean she is required to file separately (cannot include her income on our tax return)?

 

From IRS instruction for "Election to report child's unearned income on parent's return", one of the conditions is:

Your child had gross income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends).

 

I guess I am asking whether "Short-term capital gains" falls under "capital gain distributions"?

 

Thank you

3 Replies
DMarkM1
Employee Tax Expert

Child Short-term capital gains (over 1100)

Yes, capital gains can be short-term or long-term.  Capital gain distributions that are reported on a 1099-DIV are included as unearned income.  

 

Since her unearned income is over $1100 she is required to file a return unless you report that unearned income on your return if you meet all the criteria below.   

  • Your child was under age 19 (or under age 24 if a student) at the end of 2020. (A child born on January 1, 2002, is considered to be age 19 at the end of 2020; you can't make the election for this child unless the child was a student. Similarly, a child born on January 1, 1997, is considered to be age 24 at the end of 2020; you can't make the election for this child.)

  • Your child had gross income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends).

  • The interest and dividend income was less than $11,000.

  • Your child is required to file a return for 2020 unless you make this election.

  • Your child doesn't file a joint return for 2020.

  • No estimated tax payment was made for 2020 and no 2019 overpayment was applied to 2020 under your child's name and social security number.

  • No federal income tax was withheld from your child's income under the backup withholding rules.

  • You are the parent whose return must be used when making the election to report your child's unearned income.

 

[edited 3/3/2021 12:40pm EST]

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purplecat
Returning Member

Child Short-term capital gains (over 1100)

To clarify, the amount involved came from short-term capital gains of stock sale (reported on 1099-B). The crux of my question is whether this falls under capital gain distribution (which would be reported on 1099-DIV I believe?).  I don't think it does, but I am just double checking. 

 

She meets all other criteria , other than my uncertainty over whether 1099-B capital gains is a form of capital gain distribution ... please do clarify for me. Thank you. 

ColeenD3
Employee Tax Expert

Child Short-term capital gains (over 1100)

Part 1 of Form 8814:

 

Child’s Interest and Dividends To Report on Your Return. Since a capital gain distribution is reported on Form 1099-DIV, the IRS allows you to include it as a dividend. Sales reported on Form 1099-B are excluded for this purpose.

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