Ugh…Kiddie Tax! Any ideas to avoid this?

[Anonymous]

Your child made $25,000 through sheer luck and you're complaining about the tax bill? This is pretty much the definition of looking a gift horse in the mouth.

[Anonymous]

Your son should refuse to pay the LTCG tax and instead pay gift income tax on his food and shelter he receives from you, because his finances are separate from your as. You say, right? Right?

[Anonymous]

Anonymous wrote:My 17 yo son invested some of the money he earned working various teenage jobs (lifeguard, ice cream shop) and invested it into a couple of stocks within his UTMA brokerage account. One of the stocks shot up and was bought out with an all cash deal by another company. He now has about a $25K long term capital gain for 2023. I originally thought he would not owe any taxes on that LT capital gain because he is still well within the 0% LT capital gain tax bracket due to his income (The 0% LTCG bracket for single filers is $44625 or less of taxable income). He would also not owe tax on his job income because he is below the regular income tax thresholds as well after the standard deduction. However, due to the kiddie tax rules he is being hit with about a $6K tax on this long term capital gain unearned income based on my (I file MFJ with my spouse) marginal tax bracket. This doesn’t seem fair since it’s his money not mine. Anyone know any legal tricks to get around this kiddie tax?

Might be too late but you should file for emancipation.

[Anonymous]

Gift your son the tax bill amount since the tax is based on your income. Think of it as Family Filing Jointly.

[Anonymous]

Anonymous wrote:Your child made $25,000 through sheer luck and you're complaining about the tax bill? This is pretty much the definition of looking a gift horse in the mouth.

It wasn't sheer luck. OP said that the kid did the research himself and took the risk. If it was that easy everyone would be doing.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Your child made $25,000 through sheer luck and you're complaining about the tax bill? This is pretty much the definition of looking a gift horse in the mouth.

It wasn't sheer luck. OP said that the kid did the research himself and took the risk. If it was that easy everyone would be doing.

OP said the child owned stock in a company that was bought out by another company. That's not something you can research. The second word gets out that Company A *might* buy Company B, the stock price of Company B will shoot up instantaneously. Unless the kid had inside information, it was complete dumb luck.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Your child made $25,000 through sheer luck and you're complaining about the tax bill? This is pretty much the definition of looking a gift horse in the mouth.

It wasn't sheer luck. OP said that the kid did the research himself and took the risk. If it was that easy everyone would be doing.

OP said the child owned stock in a company that was bought out by another company. That's not something you can research. The second word gets out that Company A *might* buy Company B, the stock price of Company B will shoot up instantaneously. Unless the kid had inside information, it was complete dumb luck.

Nope. It’s clear you don’t buy individual stocks and have no idea what you’re talking about. People buy stocks of companies all the time that MAY be potential buy out candidates. For example, this occurs quite often in the Pharma/Biotech sector where small R&D bio companies have very promising drugs that get approved by the FDA. But these small bios need a bigger commercial Pharma company to market, distribute, and sell the drug and so they look to get acquired (sometimes in an all cash deal, sometimes all stock, stock/cask, etc). Please stick to mutual funds PP so you don’t get hurt.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Your child made $25,000 through sheer luck and you're complaining about the tax bill? This is pretty much the definition of looking a gift horse in the mouth.

It wasn't sheer luck. OP said that the kid did the research himself and took the risk. If it was that easy everyone would be doing.

OP said the child owned stock in a company that was bought out by another company. That's not something you can research. The second word gets out that Company A *might* buy Company B, the stock price of Company B will shoot up instantaneously. Unless the kid had inside information, it was complete dumb luck.

Nope. It’s clear you don’t buy individual stocks and have no idea what you’re talking about. People buy stocks of companies all the time that MAY be potential buy out candidates. For example, this occurs quite often in the Pharma/Biotech sector where small R&D bio companies have very promising drugs that get approved by the FDA. But these small bios need a bigger commercial Pharma company to market, distribute, and sell the drug and so they look to get acquired (sometimes in an all cash deal, sometimes all stock, stock/cask, etc). Please stick to mutual funds PP so you don’t get hurt.

I’ve made quite a lot of money investing this way. Not for the risk adverse however. High risk / high reward.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Your child made $25,000 through sheer luck and you're complaining about the tax bill? This is pretty much the definition of looking a gift horse in the mouth.

It wasn't sheer luck. OP said that the kid did the research himself and took the risk. If it was that easy everyone would be doing.

It’s smart of him to research but it’s still some good luck what happened. It could have gone the other way even after careful research.

[Anonymous]

Anonymous wrote:Gift your son the tax bill amount since the tax is based on your income. Think of it as Family Filing Jointly.

This is what we would do.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Your child made $25,000 through sheer luck and you're complaining about the tax bill? This is pretty much the definition of looking a gift horse in the mouth.

It wasn't sheer luck. OP said that the kid did the research himself and took the risk. If it was that easy everyone would be doing.

OP said the child owned stock in a company that was bought out by another company. That's not something you can research. The second word gets out that Company A *might* buy Company B, the stock price of Company B will shoot up instantaneously. Unless the kid had inside information, it was complete dumb luck.

Nope. It’s clear you don’t buy individual stocks and have no idea what you’re talking about. People buy stocks of companies all the time that MAY be potential buy out candidates. For example, this occurs quite often in the Pharma/Biotech sector where small R&D bio companies have very promising drugs that get approved by the FDA. But these small bios need a bigger commercial Pharma company to market, distribute, and sell the drug and so they look to get acquired (sometimes in an all cash deal, sometimes all stock, stock/cask, etc). Please stick to mutual funds PP so you don’t get hurt.

There are tens of thousands of biotech firms, the vast majority of which will never get bought out. Investment banks have armies of people trying to figure out which ones might get bought. So weird how a 17 year was able to figure it out on his own. Goldman needs to hire this kid. Also, because it's so hard to know which ones will get bought, most Wall Street people just buy XBI.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm not aware of any way around this, at least not at this point in the following year.

What's wrong with him paying his capital gains tax? Regardless, soon he won't be a dependent so this likely won't happen again.

This. I mean, sorry you can't figure out how to shelter your 17 year-old's windfall from taxes but oh well? He's still up 19k for doing literally nothing, I think it will work out in the end.

He did do something. He spent his own time researching the investment and risked his capital. He should reap the rewards and if it wasn’t for the kiddie tax he would owe nothing in LTCG taxes. Just remember without the robust capital markets that the US has to fund investments, entrepreneurial efforts, etc this country would not be the economic powerhouse that it is. There would be substantially less taxpaying jobs to pay for SS, Medicare, and infrastructure as example. You must be a socialist.

He will reap the rewards. He earned 25k and after paying the cg tax will have 19k. Congrats! Saying "but he wouldn't owe anything if he wasn't a dependent" is like saying I wouldn't owe any US taxes if I was French and earned my money in France. True, but irrelevant!

Just pay the tax. Thinking people should pay the taxes they legally owe dies not make one a socialist. These are the actual current US tax laws.

Personally I wouldn’t mind paying taxes so much if the govt didn’t waste it on such a grand scale. There is so much waste and frivolous spending in the govt it’s mind boggling. And I would know, I worked for the govt for some years and the waste I saw bothered me as a taxpayer.

So run for office or vote in new leaders.

You don’t say, I don’t like how my representatives are doing their job, so I will pay the amount of tax I prefer. There are laws, and they apply equally to all.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If more people thought like you, there would not have been rescue workers out on the Pataspco River (after the collapse of the Key Bridge) within ten minutes.

Parents would be out in row boats looking for their missing children.

WTF?

Maybe you don’t understand where the money comes from to pay civil servants/public workers.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Your child made $25,000 through sheer luck and you're complaining about the tax bill? This is pretty much the definition of looking a gift horse in the mouth.

It wasn't sheer luck. OP said that the kid did the research himself and took the risk. If it was that easy everyone would be doing.

OP said the child owned stock in a company that was bought out by another company. That's not something you can research. The second word gets out that Company A *might* buy Company B, the stock price of Company B will shoot up instantaneously. Unless the kid had inside information, it was complete dumb luck.

Nope. It’s clear you don’t buy individual stocks and have no idea what you’re talking about. People buy stocks of companies all the time that MAY be potential buy out candidates. For example, this occurs quite often in the Pharma/Biotech sector where small R&D bio companies have very promising drugs that get approved by the FDA. But these small bios need a bigger commercial Pharma company to market, distribute, and sell the drug and so they look to get acquired (sometimes in an all cash deal, sometimes all stock, stock/cask, etc). Please stick to mutual funds PP so you don’t get hurt.

There are tens of thousands of biotech firms, the vast majority of which will never get bought out. Investment banks have armies of people trying to figure out which ones might get bought. So weird how a 17 year was able to figure it out on his own. Goldman needs to hire this kid. Also, because it's so hard to know which ones will get bought, most Wall Street people just buy XBI.

You never know. Perhaps the kid is really good at investing. Almost all of what you need to know about investing you can learn on the internet yourself. There's no secret sauce. No need to go to college or get an MBA just teach yourself if you have the discipline and desire. Clearly this kid did and it paid off.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:If more people thought like you, there would not have been rescue workers out on the Pataspco River (after the collapse of the Key Bridge) within ten minutes.

Parents would be out in row boats looking for their missing children.

WTF?

Maybe you don’t understand where the money comes from to pay civil servants/public workers.

I could probably fire a quarter of the civilian bureaucrats working in the Pentagon and it wouldn't make a difference to our warfighters who put themselves in harm's way. I could probably say the same for most of the Executive Departments starting with the Dept of Education and HUD. So much waste in the govt.