Kiddie Tax question

[JJStephens]

Most of my client base is not the typical 'kiddie tax' crowd so I'm not real familiar with it and a couple hours' research hasn't turned up an answer to my dilemma.

Taxpayers are MFJ (28% marginal bracket). Two of their kids are now FT college students (ages 19 and 21 at 12/31/2015). Sales of stock from UTMA accounts in both kids' names resulted in LT gains totaling a bit over $6000 for each 'child'.

If I understand it correctly I can only report interest, dividend, cap gain distributions and Alaska Perm Fund dividends using Form 8814 on the parents' return. I take 'cap gain distributions' to be amounts reported on Form 1099-DIV. I've searched but can't find anything that defines that term differently.

Since this situation does not involve a cap gain distribution but rather realized cap gains and their income exceeds the unearned income filing threshold I believe the kids will have to file their own returns and include Form 8615 to determine the kiddie tax.

Am I on track? TIA for any illumination you can offer.

[Lion EA]

Yes.  I think of it as anything I enter on Schedule B or that comes in on 1099-INT or -DIV could go on parents' return, but Schedule D/1099-B requires the child to file a return -- as my starting point to look at the whole family.

Most of the time, even if I may use 8814 on parents', I often will NOT want to as it raises parents' AGI, changing things like medical deductions and their state returns.

[JJStephens]

Thanks. That all makes sense ... now that I hear it come from someone else!