Nominee interest income?

Technical topics regarding tax preparation.
#1
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Client was a minor when his mom passed away. His aunt held a sum of money left by his mom for him with the intention to pass the money to him eventually. Form 1099-INT of the interest income is issued to his aunt by the bank under his aunt's tax ID. His aunt wants client to report the income since that is technially his money. They asked me what to do.

My advice is for his aunt to issue a Form 1099-INT to client as nominee interest. Is it the correct advice?
 

#2
CathysTaxes  
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That is what I would do.
Cathy
CathysTaxes
 

#3
mariaku  
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Put it in a proper custodial account for next year, so it'd get reported under the child's SSN.
What if something were to happen to the aunt and all the money in all accounts under her name were to be distributed according to her will - and may be not to your client?
Or are they hiding it from college's financial aid office?
 

#4
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Not sure about their reasons or motives.

I just want to make sure the tax return is done right and he should report the interest income as the money belongs to him.

My question now is:

If his aunt does not want to go through the troube to issue a Form 1099 to him, can he just go ahead to report the interest income in his tax return?
 

#5
Dennis2  
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assignment of income is a no no. So long as money belongs to aunt so does interest. intent to transfer is meaningless for tax purpose.
 

#6
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Dennis2 wrote:assignment of income is a no no. So long as money belongs to aunt so does interest. intent to transfer is meaningless for tax purpose.


But if the aunt did pay him back the interest income in 2020, then they are technically required to go filing the Form 1099 nominee interest route, is it right?
 

#7
Dennis2  
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You cannot gift income. So long as she has legal right to the funds the income is hers.
 

#8
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I am just curious, if that is the case, then under what particular situations would one taxpayer designates nominee interest income to another taxpayer by filing Form 1099 be applicable?
 

#9
Webster  
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taxtothebest, would a joint account with the 1099 issued to only one account holder be an example?
 


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