PerIRS Publication 929Tax Rules for Children and Dependents, page 14:
Income from property received as a gift.Your child’s unearned income includes all income produced by property belonging to your child. This is true even if the property was transferred to your child, regardless of when the property was transferred or purchased or who transferred it.
Your child’s unearned income includes income produced by property given as a gift to your child. This includes gifts to your child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act.
A Form 1099-B or 1099-DIV should be received at the end of the tax year from the financial institution handling the UGMA/UTMA account to report any interest or earnings on the account.
For additional information regarding this topic, please refer toUGMA & UTMA Custodial Accounts.
The terms of the trust are set in the state statute. All 50 states enacted a Uniform Transfer to Minors Act (UTMA), which in some cases supplements the UGMA, and in others replaces it, so you may need to check with your state for questions regarding allowable withdrawals.
