Capital Gains Tax on Sale of Securities?

I have a mutual fund in my minor daughter's name (UGMA) who will now need the funds for college. She will realize significant capital gains as I bought mutual funds after the 2001 market crash. I read recently there is a tax law through 2010 whereby any capital gains on sale of securities is taxed at a zero rate if your total income is in the 15% tax bracket. The advice was to sell as much as possible so as not to put her in the >15% tax bracket, and then immediately buy back the mutual fund, so as to reestablish the cost basis at a higher level and lock in those gains as "tax free". Can someone verify this information, and refer me to the proper tax code?

your information is incorrect.

there is no zero rate on capital gains unless the amounts are so small that no tax is due at all.

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maybe there's a play here on paying 15% long term capital gains now in order to avoid the higher cap gains tax rate that the Democrats want to see after 2010 [when the Bush tax cuts expire].

of course, 15% of value gone now is 15% that isn't making any profits over the next few years, too -- so your pencil had best be very sharp indeed if you're going to profit from this.

AND, this relies on the Democrats actually raising the tax -- my fearless prediction is that they will and it'll cause a recession and then they'll scramble to fix the problem they've caused so they don't lose the 2012 elections outright.

Please consult a CPA, you may create a bigger problem by going on with your plan.
Also a Financial Planer or a Stock Broker, can give some advise. You are wrong on some of the assumptions.
Good luck

Your information is generally correct. If you are a low-incomer (10 or 15 percent tax bracket) any capital gains that you realize are taxed at 0%. The question is not can you do this. The question is, assuming an IRS audit, will you be able to get out of paying tax on those gains? Substance over form rules apply here. There are many cases that deal with the idea of substance over form. In almost all cases you will find that despite following the letter of the law, if it smells fishy, the IRS will penalize you. I can also post cases that are relevant if that would help more, though that may have to wait until the weekend). By the way, who gave you the advice? A financial planner?