Question

mr. smith wants to help his daughter, emily, save for her college education. to this end, in 2020, when she was 15 years old, he put $3,000 into a gic in her name, for a one year term. the gic renews on an annual basis. on its maturity in 2021, emily rolled the $3,000 into another gic for one year and the interest earned during the first year into a second one-year gic for $400. in 2022, the interest earned on the two gics was $320 and $32 much of this interest, if any, must mr. smith report on his 2022 income tax return?

Answer 1

Mr. Smith may not need to report the interest earned from his daughter Emily's GICs on his taxes; Emily might be responsible for reporting it, depending on local tax laws and if she is required to file a tax return.

Step-by-step explanation:

Regarding Mr. Smith's tax obligation for his daughter Emily's Guaranteed Investment Certificate (GIC) interest income, the tax implications may vary based on the jurisdiction's tax laws. Generally speaking, if the investment was made as a gift to a minor child, the interest earned might be attributed to the child, especially if the funds are in the child's name and the child has control over the account. In many jurisdictions, children have tax-free allowances or lower tax rates. Consequently, if Emily earns $320 from the original $3,000 GIC and $32 from the $400 GIC in 2022, depending on local law, it might be Emily who would report this interest income on her taxes, if she is required to file a return at all. Mr. Smith would not report this on his income tax unless the law specifically attributes the interest income of a minor's investment back to the parent.