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URL:  http://boards.fool.com/first-year-into-custodial-acct-for-6-yr-old-10463313.aspx

Subject:  Re: custodial account Date:  12/14/1998  3:22 PM
Author:  jessholl Number:  7135 of 121338

first year into custodial acct. for 6 yr old grand-
child with on-line brokerage firm. Have gained above
$650.
question: before years' end do i need to liquidate back
into the account then buy right back in to the same
stock (still rising) in order to lock in the $650 of
unearned income allowed to be tax free for '98 and start at capital gains "0" for '99 ?
question: if i should be in for long term investment
(several years in same stock) and don't liquidate back
into the account at each years end, do i forfiet the
tax exempt $650 of unearned income allowable per year
or does the tax advantage accumulate through the life
of the custodial account ? need to stay year to year
current?

The tax advantage does not accumulate.
The capital gains are only counted tax wise when they are realized. Meaning yes, if you want the kiddie tax exemption then you must sell for it to count You may sell every year, just take into consideration the brokers commision and transaction costs (stock spikes while you are out of it). Since it is a gain rather than a loss you would not be subject to wash sales rules.
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