How to handle a 1099B for a custodial account

[TerryM45]

I claim my daughter as my dependent. I have a custodial account for her that sent a 1099-INT and 1099-B in her name. She has no earned income and her only unearned income is from this account and was less than $900 so to my understanding she does not need to file taxes, but I just want to clarify because of the dollar amounts on the 1099-B.  The1099-INT reports less than $900 interest. The 1099-B has $10,000 in Proceeds (box 1d) and $10,000 in Cost Basis (box 1e) with a gain/loss of $0. Do I need to file this somewhere? Thanks for the advice.

[DianeW777 · Accepted solution]

Yes, she does need to file because the filing requirement includes the proceeds of the 1099-B and the 1099-INT even though she has less than the filing requirement when the cost basis is placed on the return. The taxpayer is always responsible for the reporting of the cost basis even though the financial agents are now required to report it as well.  The filing requirement uses 'Gross Income' which is before cost basis.

She needs to file her own tax return because the 1099-B cannot be included on your tax return.

• Tax Filing Requirement for Children

The IRS defines unearned income as:

• Taxable income from investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. 
• It also includes unemployment compensation, taxable social security benefits, pensions, annuities, cancellation of debt, and distributions of unearned income from a trust and capital gains.

If you have more questions, please provide more clarification as to what types of income are on your tax return, and exactly where you see it under deductions and credits.

[powell2]

I'm new to this and have the same scenario with similar numbers for two dependents that received 1099-Bs. One dependent received it from a custodial account, the other received it from a youth account. Can you point me to the place that states Unearned Income includes Gross Income (i.e., proceeds (box 1d on 1099-B) before cost basis (box 1E) is applied)? Maybe it's just assumed. I've read conflicting advice on this, and wanted to make sure. 

So this means that I need to file taxes for both dependents, but it appears that they would not owe taxes. I would file form 1040 and 8615. I haven't figured out of to get TurboTax to complete the 8615 yet. Any suggestions?

Thanks!

[RobertB4444]

This IRS publication has the test to figure out how to determine whether your minor child needs to file a tax return.  It also will let you know that 'gross income' includes all income earned and unearned.

Form 8615 is attached to your return and it is filed instead of filing separate tax returns for your minor children.  It can be used when their income consists entirely of dividends and interest.  It can't be used with a 1099-B.

@powell2