Can I balance a $5000 long term cap.gain for 1 dep.kid, with a $4000 long.term.cap.loss for a 2nd dep.kid?

Question

Both represent sales of mutual funds in 2 kids respective UGMAs.

I hope I am mis-interpreting form 8814. It says can be used for "capital gain distributions", but I assume this does not include long term capital gains from a sale: correct?

Form 8615 allows cap.gains to be combined across kids so they can be taxed at a higher rate, but cap.losses are truncated to zero in line 3 so can't be used to balance other kids gains. Right?

Usually, in spite of the complexity, the IRA makes sense when you think about it. Can it be that they want to tax the sum of the capital gains of the kids at the higher rate, but not allow a balance with capital loss of the kids, even if they are allowed to balance out on individual tax forms? This seems unjust.

Answer 1

You are right. Form 8814 is only from mutual fund dividends or "distributions" that are characterized as capital gain distributions.

Form 8615 is only for kids with income > 1700 so it doesn't apply to the child with a loss.

This was just structured badly. You should have a trust or pshp that the kids own or are the beneficiaries in the trust.

In the trust you can keep control and eveny qualify for the annual gift tax exclusion.

Answer 2

i would ask a lawyer or accountant