"billk[at]optonline.net" <billk[at]optonline.net> wrote:

- quote -

Well THAT'S not true.

- quote -

No idea where you come up with that number.

- quote -

Rules are quite clear. The initial contribution has been
ratably spread over five years. If you have room between
your annual ratable gift and the current gift tax exclusion,
there is nothing preventing you from gifting that amount tax
free.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

billk[at]optonline.net wrote:

- quote -

You don't get to automatically treat gifts as being made
over 5 year, you have to make an election to do so by
checking a box on Schedule A of the gift tax return. If you
make the election, the gift is treated as being made 20% in
the year of the actual gift and 20% in each of the following
years. The 20% future year amounts will be reported on the
gift tax returns for those years if a gift tax return is
required.

Under your example, If someone contributed $45,000 in 2006
and made the election, the deemed 2006 gift would be 20% x
$45,000 = $9,000. A gift tax would need to be filed for
2006 to make the election. No gift tax would be due in 2006
because this is below the $12,000 annual exclusion amount.

In 2007, an additional gift of $15,000 would be added to the
$9,000 gift that would have to be reported that year, for a
total gift of $24,000 in 2007. Of that amount, $12,000 (or
perhaps a higher amount if the inflation adjustment causes
an increase) would be free of gift taxes because of the
annual exclusion. The remaining $12,000 would eat into your
$1 million lifetime gift tax exclusion (or if you've already
used that up, then you'd incur gift tax).

For more information, see the instructions for Line B of
Schedule A on page 5 of the instructions for the gift tax
return: http://www.irs.gov/pub/irs-pdf/i709.pdf

--Chris Ballard

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I understand that with the new $12,000 annual gifting limit
an account owner can now accelerate deposits to a 529 Plan
of $60,000, but cannot make any more gifts to the account
for the next 5 years.

So if someone made a $45,000 deposit in 2005, does that mean
they can then make an additional deposit of $15,000 in 2006
without filing a gift tax return?

Also if a grandparent wanted to make a gift to a 529 plan it
is advisable to make the check payable to the plan directly?
If the grandparent made the check payable to the owner
(parent) and they deposited it into the account would they
have both then made a gift?

Are there any IRS rulings on ths issue or can anyone point
me to an answer to this question?

Any help is appreciated.

BK

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >