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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 12020
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I just found out that my son's UTMA owes $4000 in back taxes.

Customer Question

I just found out that my son's UTMA owes $4000 in back taxes. I thought there was no taxes due till money taken out. Now I find as soon as items sold I have to pay taxes on the capital gains, regardless of whether money taken out or not.
Submitted: 2 years ago.
Category: Tax
Expert:  Lane replied 2 years ago.
Hi,That's right, the service calculates capital gains taxes for custodial accounts the same waythey (IRS) do for a non-custodial account..'Gains and losses are based on the net difference between the purchase price after commissions and the selling price after commissions. At the end of the year, you add up all of the individual gains and losses reported on Form 8949 and carry the totals over to Schedule D. If the account has an overall gain, it will be subject to capital gains tax..Now, I may be stating the obvious, but under the kiddie tax, a child gets a $1,050 standard deduction for investment income and gets taxed at his lower rate for the next $1,050 of income (likely not taxable if he has no other income ... so this makes the threshhold income threshold for the tax is $2,100 for 2015..Are you taking those yearly threshholds into consideration?2000 for 2013 and forward.
Customer: replied 2 years ago.
Yes, he made about $15,000 last year before he went to college.
Expert:  Lane replied 2 years ago.
OIC, well an amended return is the only real answer ... and in my exoerience if you ask for abatement of an penalties for reasonable cause, they've waive ... You're not the first to make thiis mistake
Customer: replied 2 years ago.
Thanks for your help
Expert:  Lane replied 2 years ago.
Let me kknow if there's anything else I can do.Are you familiar with reasonable cause?
Expert:  Lane replied 2 years ago.
OK I still don't see you coming back in..I hope this has helped to clarify..If this HAS helped, I would appreciate a positive rating (using the stars or smiley faces on your screen)… That’s the ONLY WAY I'll be credited for the work here, Thanks! .Lane