Children inheriting an IRA

[pakottmann]

I have a married client, who has a stepson and 2 daughters These 2 daughters ages 13 and 14 inherited an IRA from a grandparent and the father had them take the distribution which is  a bit over $17,000 each.  The parents taxable income is $306,000.

I am thinking it is better to let the daughters claim themselves, (although the parents lose the child tax credit)  I am surprised that even if they claim themselves and the parents do not, the parents taxable income still comes into play.  Is that because the parent "COULD" claim the child but doesn't?

I was then thinking that maybe they could get the $1400 (since the high income parents did not get it) but assume that since the parents COULD but didn't claim them they can't get it.

If one of your experts could look at this and advise me, I have been searching with no luck.

If you want numbers:

 If the parents claimed the children and the children claim the IRA

The parents owe $5100

The children each owe $3768

If the parents do not claim them they owe $9100, and the children claim themselves EACH  owe $1174. 

But this still takes into account the parents income (I guess that is part I am having a problem with) It is still a savings but is that correct?.

PLEASE any suggestions

[sjrcpa]

Kids cannot claim themselves if their parents could claim them, whether the parents claim them or not.

Kids likely did not support themselves. Where did their $17K go? Savings?

Read up on Kiddie Tax.

[qbteachmt]

"If one of your experts could look at this and advise me,"

Just a note that this is a Peer User Community and the help you get is from volunteers, unless there is Intuit in their username or badge. There is no "your experts" since this is not Customer Support, but lucky you, it's a greatly informed community of peer users.