My kids (minors) each received a gift of some stock from my wife's parents last year. The stock is in the kids' names, with my wife listed as the custodian. They each made just slightly over $100 in dividends last year, and have no other income. No income tax was withheld. They each received a 1099-DIV form.

Are they required to file a tax return and pay tax on the dividends?

2 Answers 2


No they do not. From form 1040 instructions, a single, non-blind dependent under age 65 must file if the following are true:

You must file a return if any of the following apply.

  • Your unearned income was over $1,000.
  • Your earned income was over $6,200.
  • Your gross income was more than the larger of—
    • $1,000, or
    • Your earned income (up to $5,850) plus $350.

There is no return required for receipt of a gift.

  • I thought this had to be wrong, but it appears you are correct: "the donor is generally responsible for paying the gift tax". So @BenMiller's kids didn't even need to file a return for the previous year; applicable taxes should have been paid by the in-laws.
    – Dacio
    Jan 28, 2015 at 21:29
  • 1
    @Dacio Correct. Gifts are technically a part of the Estate tax - you have a modest annual exclusion (up to $14000 per recipient this year) and a lifetime exemption (around 5.4 million). Above that you pay up to 40% in estate tax. This prevents people from getting around the estate tax by gifting their estate ahead of time (and the unification of the two makes gifting simpler, really).
    – Joe
    Jan 28, 2015 at 21:56

If the gift was stock that they have owned for years there can be one hitch: The basis of the stock doesn't reset when it is gifted.

For example if grandparents have owned stock that is currently worth $10,000 today, but they bought it decades ago when it only cost them $1,000; then if the new owner sells it today they will have a gain of $9,000.

The clock to determine short term/long term also doesn't reset; which is good.

The basis needs to be determined now so that the gain can be accurately calculated in the future. This information should be stored in a safe place.

Gains for dividends are investment income and the rules regarding the kiddie tax need to be followed.


You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .