Form 8615 (kiddie tax) and parent's capital loss

[Charley in Ohio]

I have a client whose son has a net capital gain for 2008 (a miracle as all of the other clients so far have net losses). Anyway, the son is a FT college student and has more than 1800 of investment income (due to the gain and other dividends/interest) that he will need to calculate his tax using form 8615. The mother (who claims him and is divorced) has a net capital loss, but otherwise substantial enough income to throw him into a high bracket. I've been reading the instructions to form 8615 and pub 926 to make sure the system is calculating his tax correctly. It seems to be, but since she has a capital loss and there is no way to reflect that in the worksheets, I am not positive. The mother cannot elect to tax his income on her return (and offset her loss against his gains) since he has earned income.

Therefore, I think the son is stuck paying a higher amount of tax (the tax before considering the 8615 computation was 14 and now is over 1,000). Does this sound correct??

Charley

[Charley in Ohio]

I think I figured it out by staring that the Line 9 worksheet under Form 8615 again... I wasn't entering the qualified dividends from the mom's return in the worksheet. I believe the capital loss on the mom's return is irrelevant since it is offsetting ordinary income and her only Sch D income is qualifying dividends. Once I enter that in, I think I get to the correct answer.