To decide whether my child's unearned income is greater than $1,050 do I add: ordinary dividends + capital distributions + realized gain? Or, do I leave realized out?

[AJ]

Please allow me to confirm the terms used in the question so that we are sure we are talking about the same things.  Dividends are clearly unearned income--no issue there.  A gain (or loss) is "realized" when the security is sold.  I refer to this gain/loss as a capital gain or loss.  And a capital gain is unearned income.  With regard to "capital distributions", I am interpreting that to mean a distribution that is not form the corporation's earnings or profits.  That distribution is normally reported as a "non-dividend distribution" on Line 3 of a 1099-DIV.  That distribution is not taxable, but it reduces the basis of the security.  The reduction in the basis could increase the realized income when the security is later sold.  But a non-dividend distribution does not affect income until the security is sold.  Therefore, because income does not exist for a non-dividend distribution, it cannot contribute to unearned income.  I hope that makes sense.