My daughter will be hit with over $700 of fed tax because of the changes to the kiddie tax this year. Currently she has a 9 month no penalty CD with 92K in it earning 1.98%. Since she had over 5K of earned income I was thinking of closing out the CD and putting 5K in an IRA for her. This would more then offset the Fed tax. I was then thinking of putting the remainder in some other safe investment(tax free muni?).

1. If I close out the CD will she pay capital gains or just the int?
2. Any other recommendations as to where the put the remainder so we get hit with the tax next year?

Thanks.