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Posted by Paul Thomas on December 5, 2006, 9:09 pm
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> My 26 year old single child has been independent since
> graduating from college in 2002. Now, said child has been
> accepted to full-time medical school. Mom and Dad want to
> pay most of the tuition which is $53000 per year. Child
> will be responsible for other expenses by consuming $30000
> savings and then taking out loans.
>
> Is there a way to pay this tuition without using my unified
> credit?
Direct payments to the college are not considered gifts.
Whether or not he's going to be a dependent (again) would
fall to his income during the years in question.
Maybe in the future, you can structure things where you're
his dependent. Scary I know.
--
Paul A. Thomas, CPA
Athens, Georgia
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Posted by cballard@tyyni.net on December 5, 2006, 9:09 pm
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NadCixelsyd wrote:
> My 26 year old single child has been independent since
> graduating from college in 2002. Now, said child has been
> accepted to full-time medical school. Mom and Dad want to
> pay most of the tuition which is $53000 per year. Child
> will be responsible for other expenses by consuming $30000
> savings and then taking out loans.
Under Internal Revenue Code Section 2503(e), you can pay an
unlimited amount of tuition on behalf of another person and
it does not constitute a taxable gift. The exclusion is
only applicable for tuition paid to "educational
organizations" described in the Internal Revenue Code, but
most, if not all, medical schools should meet that
definition.
--Chris
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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Posted by Shyster1040 on December 5, 2006, 9:28 pm
Please log in for more thread options So long as Mom and Dad pay the medical school directly for
the costs of tuition (not including books, supplies,
dormitory fees, board, or other similar expenses that do not
constitute direct tuition costs), those payments should not
constitute "gifts" for federal gift tax purposes and
therefore are not subject to the federal gift tax. See Code
Sections 2503(e)(1), (2)(A).
Be careful, however, to make sure that (1) Mom and Dad send
the checks directly to the school themselves and do not send
the money to the child, either for the child to pay the
school, or as reimbursement for payments the child already
made to the school, and (2) the school is a regular school,
with a regular faculty and curriculum and a body of
regularly enrolled students in attendance at the place where
it carries on its educational activities (probably not a big
issue, just make sure).
To the extent that Mom and Dad want to pay for items that do
not constitute "tuition," e.g., books, supplies, housing,
etc, they could instead make an excudable gift of those
amounts to the child each year. Mom and Dad should be able
to use the split-gift provisions under Section 2513, which
would enable them to make a total gift to child each year of
twice the amount of the annual gift exclusion (which is
$12,000 for 2006), meaning that, e.g., in 2006 Mom and Dad
could make an outright gift to child of $24,000 without
having to pay any gift tax on that amount or use up any
portion of the unified credit.
With all of the above possibilities, I would avoid the whole
briar-patch of interest-free loans to children.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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