Discussion:Kiddie Tax with a twist
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Discussion Forum Index --> Tax Questions --> Kiddie Tax with a twist
Ddspetersen (talk|edits) said: | 11 February 2007 |
| Child is 9 with interest income of $3448. Would like to report on the parent's joint return, however, here's the twist...parents both died 8/25/06 and this interest income was from life insurance payout. Knowing that the parent's income earned after DOD is reportable on 1041, I'm thinking I'll have to do a separate 1040 for the child instead of reporting on parent's final 1040. Any thoughts? | |
Ddspetersen (talk|edits) said: | 11 February 2007 |
| Found the answer after posting question... Publication 929. If neither parent is alive 12/31 then no 8615, instead figure child's tax in normal manner. | |
| 12 February 2007 | |
| Yes, but remember that a foster parent is treated as parent for purposes of the kiddie tax. Don’t ask me to define “foster parent” because there are at least a dozen different definitions for the term. | |
| 12 February 2007 | |
| May be more complicated than that. There may very well be a trust here. | |
Ddspetersen (talk|edits) said: | 12 February 2007 |
| Right now the child is under the care of grandma. It's a temporary guardianship as the 2 sets of grandparents fight for custody. | |
| 12 February 2007 | |
| I believe that the child would probably be treated as a foster child since there is an existing court order. | |
| 20 February 2008 | |
| I have a similar question but a little different twist. My client has a 16 year old granddaughter whose mother died in 2006. The granddaughter's father abandoned them some time ago and they do not know how to find him. He is completely out of the picture.
In the trust/will the mother named a friend of hers to be trustee and guardian. The court appointed the friend as guardian and the 16 year old lives with her. The grandfather fully supports the child and the guardian has released the dependency exemption to the grandfather although his income is so high it doesn't actually matter to him. My question is whether the kiddie tax follows the grandfather or the guardian. I believe it should follow the guardian since she would be considered the custodial foster parent and she should claim the exemption but I wouldn't mind getting a little feedback. Of course the question is coming about because they would like to take advantage of the zero capital gains rate next year consequently I want to be very careful in how I prepare the returns this year. This is my first try at using this forum so if intejecting this question in an ongoing discussion is not looked well upon - I apologize. | |
Death&Taxes (talk|edits) said: | 20 February 2008 |
| A PPC Tax Action Bulletin notes that dependency is not the decider of the Kiddie Tax, and when we go to Sec. 1(g)(5)(A) we see that it is the custodial parent. | |
