<p>My son worked during the summer and although he made $5,170, no withholding was taken and no tax return was due to be filed. Funds were liquidated from his UTMA during 2008 that generated a $6,100 long term loss I assume I have to file for him just to register the loss even though he isn’t entitled to a tax refund since no taxes were due in 2008.</p>
<p>A follow up question, how long can he carry forward the losses on his UTMA? If he doesn’t have any taxes withheld next year is he out of luck with $3,000 of unused losses per year?</p>
<p>Yes. He should file a return. Not necessarily to register the losses, but because a 1099-B will have been issued for the amount of the Gross Proceeds. Without filing a return, the IRS won’t know that your basis was higher and that you actually have a loss. If you don’t file, you WILL receive a notice from the IRS asking for the tax on the gross proceeds. </p>
<p>Yes. Unfortunately, he carries forward the loss at a rate of $3,000/yr or to the extent of gains. Whether he has taxes withheld or not is irrelevant. The carry forward losses will go be offset against his income. You probably won’t have to file if he doesn’t make more than the standard deduction though.</p>