Dear Ephemere,
Let me try to answer your specific questions, OK?
You ask:
(1) Suppose I am married, and I make a $55,000 contribution during
2004, avoiding the gift tax. Can my wife make a $55,000 contribution
during 2005 and avoid the gift tax? Or does her contribution need to
occur during year 2004, also? In other words, can my wife and I have
our own independent "five-year clocks"?
Response: The contributions are based on $55,000 per DONOR and per recipient.
So, both you and your wife may make that donation in the same year.
Then, you cannot use your gift tax exclusion for gifts to that
person for another five years. You MAY make similar gifts to
other future students.
You ask:
(2) Suppose I am single. Does my $55,000 contribution need to be in
one lump sum in order to avoid the gift tax, or can I make several
contributions of varying amounts during 2004 that add up to $55,000?
Response: You may make the contribution in several payments
over five years. Again, per recipient.
You ask:
(3) Suppose I am single and make $25,000 of contributions during 2004.
Can I make $30,000 of contributions during 2005 (for a two-year total
of $55,000) and still avoid the gift tax?
Response: Yes. See answer to (2).
You ask:
I suspect that if I could find the actual law or regulation,
especially in an easily digestible form such as an IRS publication,
that would answer all of these questions.
Response: OK Ephemere, you will be amused by this answer.
The source is the Internal Revenue Code - Code Section 529.
That's why it's called a 529 Plan.
Here's a link to the code section - it's a long link, so you'll
really need to be sure to paste carefully.
http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t26t28+460+1++%28%29%20%20AND%20%28%2826%29%20ADJ%20USC%29%3ACITE%20AND%20%28USC%20w%2F10%20%28529%29%29%3ACITE%20%20%20%20%20%20%20%20%20
OR, you can run your own search of the code:
http://uscode.house.gov/search/criteria.php
You'll only need to enter the following information into
the search tool:
Title: 26
Section: 529
Then, simply click on the search button.
It will give you the above link and a link to an update.
You'll also find an interesting twist here:
http://cbs.marketwatch.com/news/story.asp?guid={58FD2818-C998-4F5A-885C-E19E3F2AD199}&siteid=mktw
I do hope this clears things up a bit more.
Please feel free to ask for clarification.
Best wishes,
Your TaxMama-ga |