CPA · Question 20 · Area I: Individual Compliance and Planning
A grandparent wants to fund their grandchild's future college education while minimizing transfer taxes. They are considering contributing to a Section 529 plan. Which of the following statements accurately describes the gift tax treatment of a contribution of $85,000 in a single year (assume annual exclusion is $17,000)?
Answer options:
The entire $85,000 is a taxable gift in the year of contribution.
Only $17,000 is allowed as an exclusion; $68,000 is taxable.
The donor can elect to treat the contribution as made ratably over 5 years, resulting in $0 taxable gift.
The contribution is unlimited and fully exempt from gift tax.
68 questions · hints · full answers · grading
Expert