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The law governing so-called 529 plans allows an individual to make generous gifts to a college savings plan (529 plan) for the benefit of another individual without any gift or estate tax consequences. A couple can make gifts up to $120,000 in one year for the benefit of another individual.
IRS has discovered that some taxpayers abuse the rules by making $120,000 gifts to several different individuals, then quickly change the beneficiary on all the accounts to one person. The donors thus circumvent the gift tax limits on gifts to an individual that would otherwise apply. The IRS has promised a crackdown.
Source: Hall Estill Tax and Estate Planning Newsletter (www.hallestill.com)
This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2010.
This publication is intended to provide general information on the subject matters covered. It is sold and distributed with the understanding that neither the publisher nor any distributor or advertiser is engaged in providing legal, tax, insurance, investment or other professional advice. The advice of a qualified professional should be sought before any reader applies a concept presented herein to his or her particular situation or business.
D.L. Perkins, LLC is solely responsible for this content.
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