Tax Facts

8603 / Who is taxed on the income from property that is transferred to a minor under a uniform “Gifts to Minors” act?

Editor’s Note: The 2017 tax reform legislation changed the treatment of unearned income of minors by applying the tax rates that apply to trusts and estates to this income. Beginning in 2020, those rules were permanently repealed.

As a general rule, the income is taxable to the minor. However, as discussed in Q 8601, unearned income of children (even potentially up to age 23), may be subject to the kiddie tax.

To the extent that income from the transferred property is used for the minor’s support, it may be taxed to the person who is legally obligated to support the minor.1 State laws differ as to a parent’s obligation to support. The income will be taxable to the parent only to the extent that it is actually used to discharge or satisfy the parent’s obligation under state law.2

1.  Rev. Rul. 56-484, 1956-2 CB 23; Rev. Rul. 59-357, 1959-2 CB 212.

2.  IRC § 677(b).

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