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I am custodian for two MI ugma/utma accounts for my daughters

who are now 20 and...
I am custodian for two MI ugma/utma accounts for my daughters who are now 20 and 15. The accounts were set-up and funded by their grandfather when the girls were 1 & 2 years old ($10000 each year for a total of $20000 in each account). Losses early on have kept the accounts underwater, so I did not file tax returns for the girls since taxes were not owed. Current values are $19000 & $17700 approx (higher value on older account).

Considering that the accounts were set-up under the old ugma law, what is the age at which the account owner should gain control?
I have continued to act as custodian even though my older daughter reached age 18 two years ago.

In retrospect I wish I had created the paper trail by filing tax returns for my girls from the beginning to track the capital losses. Is there a method to reestablish that record or how & when do I (or my daughters) transition to reporting the sch. D info for these accounts?
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Answered in 15 minutes by:
4/9/2012
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
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Hi and welcome to Just Answer!

The age of majority when the child should gain control over his/her account is set by the state - regardless when ugma/utma accounts were created.

In Michigan - the age of majority for both account types (ugma and utma) is 18 years - so you should not act as a custodian anymore for your older daughter unless you have POA.

 

Assuming your daughters are your dependents - and have income only from these accounts - they are required to file if gross income is above $950 (in 2011).

They should be sent 1099 forms depending what type of income was credited - interest, dividends, etc.

If their unearned income is above $950 - they are required to file a tax return - or in some situations you may choose to claim their income on your tax return - you can file Form 8814 - www.irs.gov/pub/irs-pdf/f8814.pdf .

 

Let me know if you need any help.

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Customer reply replied 5 years ago
If I had filed returns for my daughters along the way, they would have capital loss carryovers on their returns that could be of benefit now (at least for my older daughter). Is there a way to get that benefit now since I did not file in prior years?

Capital losses should be used to offset other taxable income.

Only capital losses above $3000 may be carried over to following years.

Generally the IRS required to file previous tax returns to show these losses and amounts to carry over.

You may not simply apply all losses from previous years.

If you were not required to file tax returns - you still may use capital losses in the current year - but would need to add a note with explanations how you calculated losses and should apply $3000 for each previous year.

Lev
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