http://www.pressies.org/taxable-gifts-to-children/
Is the money I recieved from an oil lease taxable if I divided it up between my 3 children.?
We received royalties from a oil lease and I put some into a CD for my children who can access it when they turn 19. Do I still have to pay taxes on all the royalties or does some qualify as a gift?
Dear L: Normally royalties are taxed when received. If that money is put into a CD, interest would be taxable when it is available to that person. If you have a 19 year CD and the interest accrues for 19 years it would not be taxed until the end of 19 years. This is a product I am not aware exists. If your children receive interest each year but it remains in the account it would be taxable each year on the children’s return. Make sure you maintain records of this as your basis will be adjusted each year for the interest paid. Seek some professional guidance from an investment person.
This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent Master Tax Advisor
