*Loan,banking and credit>>>child tax

Does my child need to pay taxes?

I am considering opening an investment account for my 4 year old, starting with approximately $3000. The gains on this account will be his only income. Will he need to pay taxes on this? Or is there a miniumum amount he would need to earn first before taxes would be an issue?

Children under the age of 14 are taxed as single persons on their earned income and on their unearned income (investment income) of $1,400 or less (IRC 搂 1(g)). No tax is imposed on the first $700 of income because of the child's $700 standard deduction. The second $700 is taxed at the child's rate. The unearned income above $1,400 of children under age 14 is taxed at the parents' highest marginal rate. A child's wages and salary are his earned income. Unearned income includes all income other than wages, salary, and other amounts received for work actually done. For example, interest, dividends, rents, royalties, capital gains, income earned in custodial accounts, and income from trusts are unearned income Source(s): http://www.uscg.mil/legal/la/topics/tax/...

as long as the income is under $850 (for 2007) there is no tax for the child. The next $850 is taxed at 10% in 2007 and any unearned income for a child under 18 is taxed at the parents rate after $1,700 in 2007.
http://www.smartmoney.com/taxmatters/ind...
I agree with the answers the other people gave.
There are two issues. You may have dividends added to the account each year and if they are over the $850 they will be taxable.
As far as gains are concerned you only have have to deal with them when you sell the stock.
If the stock is worth $4000 a year from now that is not income becuase you still have the stock.
If you decide to sell it then it becomes income and you have a $1000 captial gain.

So at some time in the future when you cash in the account it will be capital gain (hopefully). Until then the only possible income is dividend.