IRS Topic Number: 553 addresses gifts to a minor which generates income. A Unified Gifts to Minors account is opened (UGMA), put in a minors name and put some stock or a mutual fund in it.
This is a mistake. Sara doesn’t have to pay taxes on it either until her interest and dividends (unearned income) reaches $1050.
Once you get above $1050 the rules change – quickly. If you have questions about those rules just ask, but stop paying taxes on your kid’s $120.