<p>My S removed about $3200 from a UTMA fund last year to pay for a laptop and car insurance and received a 1099 for this money. It was from a fund that we initially invested about $5500 ten years ago. He didnt earn any money last year so my question is about filing a tax return for him. Is it required that we file a 2010 tax return for him? Ive read online about capital losses for minors that can carry over to the next year that they do earn money. This sounds like its worth filing for this reason. What forms I would need to file for this capitol loss? Thanks</p>
<p>I’m not an expert on this particular issue … I prefer making money in UTMAs … but since the amount is small I’d suggest filing a 1040 (instead of 1040EZ) and attaching a Schedule D documenting the $2,300 loss.</p>
<p>That said, I doubt your S will see a benefit in out-years. Somewhere along the line he’ll earn a few thousand dollars, and instead of paying no tax on the few thousand he’ll pay no tax on the few thousand minus $2,300. JMHO of course.</p>
<p>Form 1040 Schedule D would be the one to use for capital gain or loss for US income tax purposes. IRS Publication 550 may help also.</p>
<p>Do you mean to say that the value of the entire account went from $5,500 to $3,200? Or that $3,200 was a sale of part of the account?</p>
<p>You don’t need to file if that’s all the income he has. The $2300 loss will be taken on this year’s return, not carried over to next year.</p>
<p>My understanding of the OP’s situation was that $3,200 was removed from a UTMA/UGMA account. That type of account can be funded with appreciated assets, for which the basis would be the basis of the Giver, which may or may not be the case here. I’m assuming the “cost” for the $3,200 in assets withdrawn was $5,500. (Example: $9,000 of GE stock deposited in the account in 1999 that had a cost basis of $5,500 … now worth a mere $3,200 and sold in 2010.) Capital Loss was $5,500 less $3,200, or $2,300.</p>
<p>The $3,200 is not income for the OP’s son … it is merely a withdrawal from his account. The $9,000 never shows up on the 1040 Sched D … but the $2,300 loss does. If the OP’s so had any income in 2010, it would be offset by the $2,300 capital loss … any “excess loss” would be rolled over to offset future income.</p>
<p>However as I stated in my prior post, I believe any discussion of loss roll-over is academic in this case, as it seem highly unlikely that the OP’s S will have much taxable income over the next couple of years.</p>
<p>Thanks for all the help. The answer for “ucbalumnus” is the value of the entire account went from $5500 to $3200. It was a tech fund that looked good back then but didn’t they all?</p>
<p>Where is taxguy when we need him? Try sending him a PM. He might be able to help with this one.</p>
<p>Your S can deduct up to $3000 in losses per year against his income for the year. If he doesn’t use all his losses, they roll over until the next year. If he doesn’t make enough to use any of the loss (i.e., his income doesn’t exceed the standard deduction), the entire loss rolls over.</p>
<p>Unfortunately, when he does get a job that pays enough to use the deduction, he will likely be in a pretty low tax bracket, so the tax savings will be minimal, but that’s the way it goes.</p>
<p>You should definitely file a return, or the IRS will come looking for an explanation of why the $3200 in income on the 1099 wasn’t reported anywhere. The IRS doesn’t know if you have a gain or loss until you tell them via the tax return.</p>
<p>I found a nice article here:</p>
<p><a href=“http://www.fairmark.com/college/kidtax/minorcarryover.htm[/url]”>http://www.fairmark.com/college/kidtax/minorcarryover.htm</a></p>
<p>Well, I guess it’s good that S will have some losses to report on his new job–we sold several mutual fund investments we made for him & D and got losses. Will have the accountant track them since S will be earning decent money, if his job ever starts (likely sometime this quarter or early next quarter).</p>
<p>I think it is safer to file a return for him. If your son does not file a tax return, the IRS will treat the entire amount as a gain, and you AND your kiddo will have some explaining to do since the amount reported on the 1099 is more than $1900:</p>
<p>[Publication</a> 17 (2010), Your Federal Income Tax](<a href=“Publication 17 (2022), Your Federal Income Tax | Internal Revenue Service”>Publication 17 (2022), Your Federal Income Tax | Internal Revenue Service)</p>
<p>Since your kid has a loss, this mess should not apply. If you use Turbotax or any other software, you can prepare more than one federal return with it.</p>
<p>The site linked by notrichenough provides excellent advice. Kaye Thomas saved me a lot of trouble when I had to deal with stock options.</p>