Question 1

Grandparent contributes $100,000 to a 529 plan for their grandchild in Year 1. The annual gift tax exclusion is $18,000. The grandparent elects to treat the contribution as being made ratably over 5 years. Grandparent dies in Year 3. What amount is included in the Grandparent's gross estate?

Accepted Answer

1. Identify 5-Year Election: $100,000 / 5 = $20,000 per year deemed contribution.
2. Timeline: Year 1 ($20k), Year 2 ($20k), Year 3 ($20k), Year 4 ($20k), Year 5 ($20k).
3. Death in Year 3: The contributions allocated to years *after* death are included in the estate.
4. Included: Year 4 ($20k) + Year 5 ($20k) = $40,000.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Including the entire amount or excluding the entire amount.

Grandparent contributes $100,000 to a 529 plan for their grandchild in Year 1. The annual gift tax exclusion is $18,000. The grandparent elects to treat the contribution as being made ratably over 5 years. Grandparent dies in Year 3. What amount is included in the Grandparent's gross estate?

How to approach this question

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