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The IRS Form 709 is filed by U.S. individuals to report taxable gifts made during the tax year.

In this example, we look at a donor who contributed $25,000 to a Section 529 plan opened for her daughter. Contributions to Section 529 plans are completed gifts for federal tax purposes. Therefore, if the contribution amount exceeds the annual exclusion for the donee, the contribution must be reported on Form 709 as a taxable gift.

However, the donor can elect to treat the contribution as made ratably over a 5year period beginning with the year of contribution. The election is available under IRC Section 529(c)(2)(B) and must be made on Schedule A of Form 709. By making the election, the yearly contribution amount can fall below the annual exclusion available.

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