I cashed in about 1500 worth of bonds for my daughter last year does that have to be reported at tax time?

Question

SHE IS 3 YEARS OLD

Answer 1

The interest must be reported.

Answer 2

Yes, it will be reported, but only the "income" you earned from cashing them. That is, the difference in price you paid for the bonds and what you sold them for. For example, if you paid $1000 for the bonds, and sold them for $1500, you will have $500 of income. That is because at some time in history, you already paid taxes on the $1000 you made to invest in the bonds in the first place.

And, assuming you held them for more than 1 year, you will only be subject to long term capital gains on that amount, which is 15%.

They are your bonds, and the income is attributed to you. What you do with the proceeds after you cash them is another matter and unrelated to whether you incur income on cashing them. (for example, you can give $12,000 each per year in gifts to as many people as you wish, including your daughter, but that has no bearing on your responsibility to identify to the income you made in liquidating assets).

Answer 3

Well, is it your social security number on the savings bonds? Probably so, so yes you would report the interest earned on your income tax return for the tax year 2007. Wait for the bank to send you the 1099-INT.

Answer 4

What kind of bonds?

I believe you are talking about Savings Bond interest which is reported as interest income on a child's tax return.

If her income is less than $850, it's free money. No tax, no return.

If you had corporate bonds or municipal bonds (which I doubt), then you could have capital gains.

Answer 5

Yes, the IRS knows a 3 year old is not going to be using money for anything. You had to have gotten it out and yes, since you don't have to pay it back like a loan you must report it.

Answer 6

Yes.