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Financial Planning / Tax Strategies
|Subject: Re: 529 Plans and Gift Taxes||Date: 9/20/2013 5:17 PM|
|Author: JAFO31||Number: 119181 of 121144|
(Ira:)I still believe the transfer of the account is a taxable (gift tax) event in its entirety due to the transfer of the rights associated with ownership, but I readily admit that my coclusion is based on logic (always dangerous in taxes) and not any specific experience or review of adjudicated precedents.
"I think otherwise, and I'm basing it on my reading of Prop. Regs. 1.529-5, which I can't link to here because it's from copyrighted reference material with editorial content."
Thanks for the reference.
I foudn te following:
page 1 - IRS issued proposed regulations under Section 529 in 1998, which remain proposed regulations today. Taxpayers are entitled to rely on them for taxable years ending after August 20, 1996.
Page 8 -
5. Change of Account Owner Other than at the Death or Incapacity of the Account Owner
a. It is not clear whether the Congress intended to permit the account owner to be changed other than at the death or incapacity of the current account owner. The proposed regulations do not address the ability to change the account owner.
b. Each plan has its rules regarding the ability to change the account owner. Some plans do not permit changes prior to the death or incapacity of the current owner.
. . .
d. Transfer tax consequences of a change in account ownership
(1) Because a gift is made when a Section 529 plan account is established, there should be no further gift tax consequences to a change in the account owner.
(2) However, the account owner controls the distributions from the account, as well as the identity of the designated beneficiary, and can return the account. Under traditional gift tax principles, the termination of such control over the account balance should be a gift.
IOW, no real guidance, and split opinion sbetween professionals.
Proposed Regs. at http://www.irs.gov/pub/irs-regs/10617797.pdf
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