Tax Type
Individual Income Tax
Description
Virginia Savings Trust account
Topic
Credits
Persons Subject to Tax
Subtractions and Exclusions
Date Issued
08-26-2010
August 26, 2010
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you appeal the individual income tax assessments issued to ***** (the "Taxpayers") for the 2006 through 2008 taxable years.
FACTS
The Taxpayers, a husband and wife, invested in a Virginia Savings Trust account (VEST) for each of their three dependent children. For the 2006 through 2008 taxable years, the Taxpayers claimed a deductions for contributions made to the VESTs on their Virginia income tax returns.
Under audit, the Department disallowed the deductions because the Taxpayers were not listed as the owners on the accounts and issued assessments for the taxable years at issue. The Taxpayers appealed the assessments, contending that they intended to set themselves up as the owners of the VESTs.
DETERMINATION
Virginia Code § 58.1-322 D 7 permits an income tax deduction for contributions made by a contributor to a VEST established with the Virginia College Savings Plan. For purposes of the VEST, Va. Code § 23-38.75 defines "contributor" as "a person who contributes money to a savings trust account established pursuant to this chapter on behalf of a qualified beneficiary and who is listed as the owner of the savings trust account." [Emphasis added.]
The VEST Program Description (VESTPD) as of January 1, 2010, clearly explains the implications of establishing a custodial account. With regard to the income tax deduction for contributions, page 27 of the VESTPD states:
-
- The Virginia state tax deduction for UTMA/UGMA VEST Accounts belongs to the Beneficiary, and is reported under the Beneficiary's social security number. UTMA/UGMA custodians are not eligible for the Virginia state tax deduction for Contributions made to an UTMA/UGMA VEST Account.
According to the VEST applications, the accounts were established as custodial accounts under the Uniform Gifts to Minors Act/Uniform Transfers to Minors Act (UGMA/UTMA). The children are listed as the beneficiaries and the wife as the custodian.
The Department must rely on Virginia statutes and documents filed with the Virginia College Savings Plan. Thus, while the Taxpayers may not have intended to open the VESTs as custodial accounts, the documentation provided indicates otherwise. Accordingly, the assessments for the 2006 through 2008 taxable years are upheld. An updated bill will be issued to the Taxpayers shortly.
The Code of Virginia sections and public document cited are available on-line www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
- Craig M. Burns
Acting Tax Commissioner
- Craig M. Burns
-
-
-
-
-
-
AR/1-4202299887.D
Rulings of the Tax Commissioner