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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: Help, please???? Date: 3/22/2003 8:28 PM
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I have a 6-year old daughter. She obviously has no wage income but earned $2 in interest and $2 in dividends. More importantly though, she had a decent sized capital loss. I tried to put her on my return with TurboTax but it was rejected because her income was too low. Just finished running everything through Taxcut FOR HER ONLY to see if, by chance, she could get any of that capital loss back. Nope. No refund owed her and no taxes owed the IRS (hey it was worth a shot). However, do I need to bother filing the return since her total earned incomed was NEGATIVE? This is the first time I've sold a stock in her account (thankfully) so I'm new to the tax preparation for minors thing. Help please???? Thanks.

Yes, you need to file a return for your daughter for two reasons. The first is that the IRS only sees the sales proceeds from the stock sale. If that number is large enough, the IRS will be looking for a return. They don't know that the transaction produced a loss until you file Schedule D. The second reason is that your daughter can carry the capital loss forward until such time as she has sufficient income or capital gains to use it against. The only way to establish the capital loss carryforward is to file the original return.

Ira
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