UTMA: help with tax gain harvesting

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Monk
Posts: 135
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UTMA: help with tax gain harvesting

Post by Monk » Fri Dec 15, 2017 9:04 am

All,

I need to be stupid-checked before I hit "submit" on a couple transactions. I plan to harvest the gains in my kids' UTMA accounts up to the tax free limit of the kiddie tax (https://www.bogleheads.org/wiki/Kiddie_tax) before the cap gains become too large to whittle down. Hopefully, doing this for the next several years will result in little/no taxes due when these funds are eventually withdrawn.

Relevant Details:
- Two dependent children (early elementary age) are the beneficiaries of UTMA accounts. I (Dad) am the custodian.
- Daughter's account value is $12k or so, with a basis around $7500. All invested in Vanguard Total World Stock (VTWSX), if it matters.
- Son's account value is $10.5k, with cost basis around $8000, also invested in VTWSX.
- Neither child has any income, earned or unearned, beyond the ~$250 of dividends these provide.
- Specific share ID is the current cost basis method for both accounts.

Questions:
- Because they receive ~$250 of dividends each year from these investments, I can realize up to ~$1850 of cap gains without any taxes due. However, they will need to file income tax returns. Are both points accurate?
- If their unearned income remains below $1050, no tax return is needed, but I can only realize up to $800 of cap gains. Also accurate?

The transaction itself is simple - sell $2500 of each fund, then buy back the next day. Because it is tax gain harvesting there is no wash sale consideration. Anything else I should be thinking about?

Many thanks as always.

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Svensk Anga
Posts: 348
Joined: Sun Dec 23, 2012 5:16 pm

Re: UTMA: help with tax gain harvesting

Post by Svensk Anga » Fri Dec 15, 2017 11:16 am

The numbers look about right.

One kink is that Vanguard's frequent trading restrictions will prevent you going back immediately to the same fund you just sold. You could buy the equivalent ETF or if you want mutual funds, exchange to a market weight split of total stock and total international.

livesoft
Posts: 58275
Joined: Thu Mar 01, 2007 8:00 pm

Re: UTMA: help with tax gain harvesting

Post by livesoft » Fri Dec 15, 2017 11:25 am

Frequent trading restrictions are overcome by automated purchases. See the wiki.
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