| You would report the capital gain on your tax return. However, there may be some favorable tax treatment for your full time son attending college. Actually, your dependent child would enjoy what is known as a “limited standard deduction” on unearned income, or income derived from investments: interest, dividends, and capital gains.
For the tax year 2008, the great news is that first $900 of a dependent child's (who is below the age of 19, or 24 if a full-time student) investment income is tax-free, and the next $900 is taxed at the child's rate, which is 10%.
Therefore, if your son had a capital gain of say $1,800 in 2008 and didn’t have additional earned income, he would have to pay $90 in tax. But, any gain in excess of $1,800 would be taxed at the parents tax rate.
In fact, your son may not be suject to any tax at all if that income was in the form of long-term capital gains or qualified dividends . This is because for the tax years 2008 through 2010, the capital gains rates are zero for people in the two lowest tax brackets and it is quite possible that your son is in that bracket due to his low income as a full time student! | 
