If you gift money to your spouse and to minor children to invest, who is generally responsible for taxes on the investment gains?

If you gift money to your spouse and to minor children to invest, who is generally responsible for taxes on the investment gains?

• A. The recipient (spouse or children)
• B. The donor
• C. The investment advisor
• D. The charity

Answer: (B)

When you gift money to a spouse or to minor children to invest, the taxes on the investment gains generally stay with you—the donor. This follows the attribution rules, which are designed to prevent income from being shifted to family members in lower tax brackets. So any interest, dividends, or capital gains earned from that gifted money are attributed back to you and taxed in your hands. This applies to gifts to a spouse and to gifts to minor children who invest the money as well. The recipient doesn’t typically report those gains on their own return; they’re attributed to you, the person who made the gift.

When you gift money to a spouse or to minor children to invest, the taxes on the investment gains generally stay with you—the donor. This follows the attribution rules, which are designed to prevent income from being shifted to family members in lower tax brackets. So any interest, dividends, or capital gains earned from that gifted money are attributed back to you and taxed in your hands. This applies to gifts to a spouse and to gifts to minor children who invest the money as well. The recipient doesn’t typically report those gains on their own return; they’re attributed to you, the person who made the gift.