How do I handle investment accounts gifted to my children?

[kjandska]

My in-laws transferred what had been custodial accounts to my children this year. My 20-year-old is living with us but does not work and is not attending college. Her account was worth approximately 10,000 at the end of last year, and it generated interest last year of $765.96. Do I have to claim the value of the entire account? Just the interest? Both? Neither? Or am I better off not claiming her as a dependent and having her file on her own?

My other daughter is 15. Her account was valued at $2550.02 at the end of the year, and it generated $191.82. My mother-in-law's name is still listed on the account ("C/F"), along with my daughter's ("UTMA/CA"). Does this indicate that my mother-in-law is still the custodian? Either way, do we have to claim the interest? The value of the account? Neither? Both? 

Thank you in advance for any help on this! 

[ColeenD3]

You would only report the income, not the value of the account. So, yes, the interest is income.

If your children qualify as dependents, you can't just decide not to claim them.

Both amounts are small. A dependent has a special standard deduction. Since both amounts are small, they are not required to file.

Dependents – If you can be claimed as a dependent by another taxpayer, your standard deduction for 2021 is limited to the greater of: (1) $1,100, or (2) your earned income plus $350 (but the total can't be more than the basic standard deduction for your filing status).

[kjandska]

I assumed that since my daughter was 20 we had the option of claiming her or not. Thank you very much for the response and helpful information, @ColeenD3!