And the young child would totally understand what was rude about the question, and never do anything outside of social conventions that may cause the parent embarrassment again. Yup it really works that easily.

When to ask a person what their gender is: 1. On medical forms, during anything medical related. Such as if you are their doctor. 2. When you know the person. 3. Anything having to do with work or other important gender related activities. However, if you do not know the person, are not in an important, authoritative position, and it won't change the outcome of a conversation or your interactions, then you don't ask. It is offensive to be asked if you are a man or a woman, CIS or trans, because it makes you wonder if people are mocking you behind your back. It will make trans people feel a lot better to be treated as humans, with normal interactions, just like any other human being wants. Just like someone with cancer does not want to be reminded of it constantly, neither does someone trying to live their life. Op should have told her daughter not to be rude and to drop it.

You're right, this is not a situation where it would be appropriate to ask. The point I was trying to make was that you should never assume a person's gender, like op was going to do when they attempted to answer their daughter's question, but I did a terrible job of it. Some people don't mind being asked (myself included), but as a general rule, yeah, don't do it