"I then sell 1,000 of those shares for $2 to return my $2000, should I not have tax until I have sold the rest for a gain, because I have only return what I input $2,000...!"
Eurotraveller would probably have answered that. Our tax system doesn't work that way.
The principle is fairly straightforward. When you next see your accountant, ask him/her to explain to you the broad principle on how it works, it will help you a lot in understanding it.
Someone mentioned trust. It is highly likely that such a trust is a discretionary trust and the trustee has the discretion as to how the trust's income is distributed to the ultimate beneficiaries and these income will be taxed in the hands of those ultimate beneficiaries. Also, Eurotraveller had correctly pointed out the higher tax rate applicable to beneficiaries who are minors (defined as anyone younger than 18 years old), this is what is called tax on unearned income of minors.
