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PUBLISHED ON: December 31, 2002

Sec. 2503(e) Exclusion for Payments of Educational or Medical Expenses

The topic of the Autumn 2002 issue of AKO Estate Planning & Tax Advisor was gifts to individuals. In that issue, we promised to explain in greater detail the rules under Sec. 2503(e) of the Internal Revenue Code (“IRC”) for direct payments of tuition or medical expenses made for another person. There are no limits on the amounts of such payments, and the payments are not considered gifts for gift tax purposes. The beneficiary of a qualified tuition or medical transfer does not need to be related to the taxpayer and an annual exclusion gift can still be made to the beneficiary.

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