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Author: TMFTaxes 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 125005  
Subject: Re: Who pays taxes on custodial accounts? Date: 9/24/1997 11:11 AM
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<<In any case, I hope to avoid the problem by buying buy-and-hold stocks that pay no dividends. Then the little girl can pay all the capital gains when she goes to college, or goes on a cruise, with the money.>>

There you go. A really good strategy. But don't forget that even if you ARE in the kiddie tax area, the first $650 of income can be received by the child TAX FREE, and the next $650 will be taxed at the 15% rate (generally). Which means that you can cash out gains of $1,300 per year, and pay taxes of only $98. Not a bad deal.

And remember also that after the child turns 14 (thereby avoiding the kiddie tax rules), if done correctly, some of the gains can be liquidated on an annual basis with only a 10% long term capital gain rate. And after year 2000, it may be liquidated at an 8% long term capital gain rate.

So you CAN have your cake and eat it too, if the proper planning is put into place.

TMF Taxes
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