Franklin Templeton Investments
August 24th, 2005
Question: How should I check on taxes for my son’s mutual fund?
When my son was born, i started a fund for him with franklin templeton growth fund. i had the understanding that it grew tax free because ANY and ALL interest and gains were just re-invested without me ever seeing it. I only put in about $50 a monty for about 3 yrs. the account is now worth about $4000. The “capital gains” per year evidently are around $150-$200. I recently became more interested in investments. I have never claimed it but as I’m reading into the tax laws about investments, I’m beginning to think that I need to claim these gains each year as little as they are. I haven’t in 10 yrs :-0
Should I have a tax person check into it for me so I can pay back taxes and penalties? or am I just getting too excited over nothing? any advice will be helpful. thanks in advance
just as a side note, the account is in his name and I am the “custodian” if I remember right.
Answer: You almost certainly have nothing to worry about. Money invested in your child’s name has a complete exemption from taxes on the first $850 of earnings. You indicate that your son’s investments are generating only $150-$200 in income per year, which is comfortably under the limit.
“This year, the law affects children younger than 18. Now, the first $850 of a child’s investment income is tax-free and the next $850 is taxed at the child’s rate. Investment income in excess of $1,700 is taxed at the parents’ higher rate”
Franklin Templeton Investments
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