All Forum Posts by: Lynn Gallagher

Thank you so much for your response. I did think about liquidating some of the account this year if I had any leeway before I hit the 25% bracket. Is there a simulator somewhere that can help me estimate what my AGI will be to try to figure out how much I can liquidate? I am going to be so close that I probably won't be able to liquidate too much but I also don't want to inadvertently push myself into the next bracket. Am I correct that I have to make the trades before Dec. 31st, right? It's not like an IRA when I can make the transaction before April 15, right? That makes it more challenging of course, because I could estimate low and end up paying the capital gains.

Is there any advantage to him filing on his own? My understanding is that I can still claim the exemption as long as he doesn't. Also, do the kiddie tax rules change for 19-year-olds?  If so, it's another reason to wait until next year. Thanks again!

Hi @Nicholas Aiola. It's very kind of you to offer help with tax questions. My question is about purchasing a property but not for investment purposes. I hope that's ok. Here it is:

I have saved in a custodial (UTMA) account for my son who is now 18 (age of majority is 21 in my state so I technically still have control) and will be going to college next fall. However, I would like to liquidate the account now (it's too aggressively invested) and use the money for the down payment on a home for him next year when he goes to college. This account is currently 100% invested in the market and is worth about $76K (34K in unrealized gains). My other motivation for quickly getting it out of his name is that financial aid is going to count this as his asset not at the parents' rate.

My plan was to have him file his own taxes (we would still claim the dependent exemption) since he only made about $2000 in his paying job this year which my understanding was that he would pay 0% capital gains. However, when I ran this by my CPA, he said he would be subject to the kiddie tax. Is there any creative way to avoid this? My CPA wasn't very helpful in thinking through alternatives or creative solutions. Would it make any difference if he put all $2000 in a traditional IRA so he had zero earned income? Then he pays no tax and zero capital gains????

Other helpful info:

-We are going to be teetering between the 15% and 25% tax bracket this year.

-Next year, due to some special circumstances, our income will be SIGNIFICANTLY lower so there is a good chance we'll be in the 15% tax bracket. So, should we just wait and liquidate it all after the new year.

-With the proposed new tax provisions, perhaps I'd be better off waiting until '18 anyway because I may be more likely to be in a tax bracket that would result in 0% capital gains? I'm not sure if there are any changes to the kiddie tax proposed. I can't find any info that addresses that so I'm guessing there aren't any changes.

Thanks for any advice you can offer!