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Rule Title: WITHDRAWALS FROM FAMILY EDUCATION SAVINGS PROGRAM ACCOUNTS
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Department: REVENUE
Chapter: INCOME TAX
Subchapter: Family Education Savings Act
 
Latest version of the adopted rule presented in Administrative Rules of Montana (ARM):

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42.15.803    WITHDRAWALS FROM FAMILY EDUCATION SAVINGS PROGRAM ACCOUNTS

(1) Earnings withdrawn from family education savings accounts, other than in a qualified withdrawal, must be included in the distributee's Montana adjusted gross income in the year withdrawn.

(2) The earnings portion of a qualified withdrawal is not included in Montana adjusted gross income.

(3) Penalties assessed for nonqualified withdrawals are not deductible in arriving at Montana taxable income.

(4) Internal Revenue Code, 26 USC 529(c)(3) shall apply for purposes of determining what portion of a withdrawal is a withdrawal of contributions and what portion is a withdrawal of earnings.

(5) A recapture tax at a rate equal to the highest rate of tax provided in 15-30-2103, MCA, is imposed on the recoverable withdrawal of contributions to a family education savings account deducted by the contributor. The recapture tax is payable by the owner of the account from which the withdrawal was made even if the account owner did not make the deductible contribution. The account owner is liable for the tax even if the account owner is not a Montana resident at the time of the withdrawal.

(6) An account owner who is subject to the recapture tax must report the tax on the tax return for the taxable year of the withdrawal and must pay the tax at the time the income tax for such year is due.

(7) The portion of a recoverable withdrawal that is not treated as the withdrawal of earnings shall be treated as:

(a) first, out of nondeductible contributions not previously withdrawn; and

(b) second, out of deductible contributions not previously withdrawn.

(8) The portion of any other withdrawal that is not treated as the withdrawal of earnings shall be treated as:

(a) first, out of deductible contributions not previously withdrawn; and

(b) second, out of nondeductible contributions not previously withdrawn.

(9) The taxpayer shall have the burden of sustaining a claim that all or a portion of the contributions withdrawn were not attributable to deductible contributions. There shall be a presumption that a recoverable withdrawal is a withdrawal of deductible contributions.

History: 15-30-2620, 15-62-201, MCA; IMP, 15-30-2110, 15-62-201, 15-62-208, MCA; NEW, 1998 MAR p. 680, Eff. 3/13/98; AMD, 2000 MAR p. 1344, Eff. 5/26/00; AMD, 2004 MAR p. 1031, Eff. 4/23/04; AMD, 2010 MAR p. 1088, Eff. 4/30/10.


 

 
MAR Notices Effective From Effective To History Notes
42-2-820 4/30/2010 Current History: 15-30-2620, 15-62-201, MCA; IMP, 15-30-2110, 15-62-201, 15-62-208, MCA; NEW, 1998 MAR p. 680, Eff. 3/13/98; AMD, 2000 MAR p. 1344, Eff. 5/26/00; AMD, 2004 MAR p. 1031, Eff. 4/23/04; AMD, 2010 MAR p. 1088, Eff. 4/30/10.
4/23/2004 4/30/2010 History: Sec. 15-30-305 and 15-62-201, MCA; IMP, Sec. 15-30-111, 15-62-201, and 15-62-208, MCA; NEW, 1998 MAR p. 680, Eff. 3/13/98; AMD, 2000 MAR p. 1344, Eff. 5/26/00; AMD, 2004 MAR p. 1031, Eff. 4/23/04.
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