14 Year Old Dependent on Parent's Return

[Yardley CPA]

I have a client, MFJ, who take their 14 year old daughter as a dependent on their return. The clients father (grandfater to the dependent) is investing on behalf of his granddaughter and the statements received by the grandfather come to him but have the granddaughter SSN listed as the taxpayer.

This year, the stock transactions totaled nearly $3,400. Does this require the dependent to file a return? I know it's below the threshold of income that is required to file a return but did not know if the fact that it is reported on 1099-B would cause it to be required?

Thank you.

[Gail in Virginia]

Investment income would count as unearned income, and according to the instructions for form 1040, if you can be claimed as a dependent on someone else's tax return, and you have unearned income of $2.350 or more, you must file a tax return. The fact that once this goes on the schedule D there may be no income to speak of or even a loss does not mean that the child does not need to file.