Ursula & John Taras wrote:

- quote -

You state the total distribution is $4000. But what is the
cost basis? Only the gain is taxed, not the entire ammount.
The kiddie tax exemption is up to $850 for 2006, so $850 tax
free, and next $850 at her tax rate. You don't mention her
age, at 14, all the gain is at her rate, not yours.

JOE

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My daughter has an UTMA account invested in mutual funds
that I would like to close and buy her instead saving bonds.
It will still be in her name but I am guessing there could
be some tax consequences on this transaction.

My question is this: will she have to file a tax return if
the total distribution will be around $4000.00 but she would
owe tax only on some $700.00 of actual earnings. I
understand that kids are allowed tax free income on up to
$750.00.

Thank you very much for your help.

Ursula Taras

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >