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I could use some needed help.

Background INFO: To celebrate the birth of a new grandchild, last January, I set up a custodial account (UGMA type) for our new granddaughter and funded this account with $10,000 (a gift) buying several aggressive growth stocks.

QUESTION: How much UNEARNED income can a child have in 2010 without BOTH having to pay ANY taxes AND the child having to file a income tax return?

In trying to divine the correct answer, I have googled the subject, read a number of the IRS regs, etc. And, here is was I think is the correct answer but I'm not sure.

A child claimed as dependent on their parents income-tax return could have up to $950 in UNEARNED INCOME and NOT have to: 1) file an income-tax return 2) report this UNEARNED income on the parents tax return or 3) Need to file an income-tax return.

I believe in 2010, a child can have up to $1,900 in UNEARNED income (from dividends, interest, capital gains) and not have to worry about the "Kiddie Tax". The first $950 would be covered by the child's standard deduction and the next $950 would be subject to 10% tax or a tax of $95 on this $1,900 in UNEARNED INCOME. Why $950 because that is amount of the standard deduction so I don't think as long as the amount of UNEARNED income is $950 or LESS there isn't any requirement to file a return? And, the child could still can be claimed as a dependent of the parent's income-tax return. Am I also correct about this?

Why do I care? Well, if I am right, I would like to take up to $950 in net short-term gains and reposition the sales proceeds into other securities which would have the effect of raising the cost basis in the account for future income-tax purposes and avoid any taxes on the gain of up to $950.

TIA for helping straighten me out. It's amazing the number of answers one get by trying to "google" the answer.
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