When is it best NOT to claim a dependent

Suppose your child has to sell 40K in mututal funds for a first year in college. Suppose 3/4 of that is taxable unearned income. The would be taxed (mostly) at the parent's rate. Why not let the child file their own return, get a standard deduction, and pay a lower tax rate? All the parent gets for the dependent is about 3000 - I think.

Whiter,
I could be mistaken, but if the mutual funds have been held longer than 12 months, you'll only pay a maximum of 15% Capital Gains Tax on the amount of PROFIT earned on this investment (not the entire $40k).

Regarding who should claim this on their taxes, I would think that the person paying the taxes is the person whose name/ssn is listed on the fund account and thus receives the 1099 tax form at the end of the year. (But maybe there are ways around this for "dependent children still in college"?)

Also, there are Education Tax Credits available too. The Hope Credit and the Lifetime Learning Credit are education credits you can subtract in full from the federal income tax, not just deduct from taxable income."
You might try going to:
http://www.irs.gov/individuals/index.html
then look across the blue banner and click on "PARENTS" and "STUDENTS").

Good luck,
Rookie