Probate & Trust Law Section Conference Manual ... - Minnesota CLE

2. Attach Explanation. An explanation must be attached to the gift tax
return that includes the following: (1) total amount contributed per
beneficiary; (2) the amount for which the election is being made; and (3)
the name of the individual for whom the contribution was made.
G. Late Election. The Advance Notice permits a late election if no prior gift tax
return has been filed for the year.
Rule 1. The election must be made on the last United States Gift
(and Generation-Skipping Transfer) Tax Return (Form 709) filed on or
before the due date of the return, including extensions actually granted, or,
if a timely return is not filed, on the first gift tax return filed by the donor
after the due date. The election, once made, will be irrevocable, except
that it may be revoked or modified on a subsequent return that is filed on
or before the due date, including extensions actually granted.
H. Substantial Compliance. If the donor fails to check the appropriate box on Form
709 to elect five-year averaging, relief may still be granted for substantial
compliance if the return otherwise indicates that the donor intended to make the
election.
I. Future Filing Requirements. If in any of the four years following the election
the taxpayer is not otherwise required to file Form 709, the taxpayer does not
need to file Form 709 to report the prorated portion of the gift attributable to that
year.
J. Second Five-Year Averaging Election. It is unclear whether a second election
can be made with respect to another contribution during the five-year period. An
example in the proposed regulations could be read to suggest no, but there appears
to be no reason to prohibit a second election.
IX.
Changing Investment Options
A. Statutory Rule. Section 529(b)(4) provides: “A program shall not be treated as
a qualified tuition program unless it provides that any contributor to, or
designated beneficiary under, such program may not directly or indirectly direct
the investment of any contribution to the program (or any earnings therein).”
B. Future Contributions. The account owner should be able, at any time, to
designate a different investment option for future contributions without violating
the section 529(b)(4) prohibition against participating in investment decisions.
C. Existing Account. Notice 2001-55 stated:
The Internal Revenue Service and the Treasury Department
recognize that there are a number of situations that might warrant a change
in the investment strategy with respect to a §529 account. Accordingly,
the Internal Revenue Service and the Treasury Department expect that the
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