## ***Savingforcollege.com A Division of Bankrate, Inc. 1151 Pittsford-Victor Rd, Ste 103 Pittsford, New York 14534***

## ***March 14, 2008***

## ***Internal*** ***Revenue*** ***Service***

## Attn: CC:PA:LPD:PR (REG-127127-05)

## Room 5203

## POB 7604 - Ben Franklin Station

Washington, DC 20044

Re: Proposed Rulemaking Relating to Qualified Tuition Programs:
IRS-REG-127127-05

Dear Sirs:

## We are writing in response to your invitation issued on January 18, 2008 to comment on the proposed regulations concerning qualified tuition programs ("529 plans") and specifically the potential abuse of 529 accounts, as outlined in the Advance Notice of Proposed Rulemaking ("ANPR").

We welcome the opportunity to participate in the process and appreciate
your consideration of our comments. We intend to submit additional
comments relating to specific issues that require clarification under
existing rules and hope that those comments will be considered as well.
Specifically, we request a 30-day extension to submit those additional
comments.

Though we are aware of certain provisions of Section 529 of the Internal
Revenue Code ("529") that allow for potential abuse of other provisions
of the Internal Revenue Code, as one of the leading independent
observers of the "529 industry", we, at Savingforcollege.com, have no
empirical evidence of intentional abuse of the provisions of 529 and are
not aware of any current practice of the abuse of 529 plan accounts.
Rather, it is our view that the majority of those individuals and
families who may benefit from 529 still, today, fail to comprehend those
intended benefits and have not sufficiently taken advantage of what 529
offers. We further believe that the existing taxation and penalty
provisions are sufficient to deter potential avoidance devices or
schemes. As a general matter we are concerned with the intent of the
Service as indicated in the ANPR to impose additional requirements and
taxation and penalties

We do welcome, however, any guidance that the Service may provide in
working with 529 plans to ensure that these plans fulfill their
objective as intended by Congress.

Our comments in this letter are focused on two principal aspects of the
ANPR.

We recognize the potential for abuse referenced under II B. of the ANPR
where you indicate that the IRS and the Treasury Department expect to
develop additional rules to address these and other similar transactions
by Account Owner ("AO"), including "(1) limiting AOs to individuals;
and, (2) making the AO liable for income tax on the entire amount of the
funds distributed for the AO\'s benefit except to the extent that the AO
can substantiate that the AO made contributions to the section 529
account and, therefore, has an investment in the account within the
meaning of section 72."

First, we do not support limiting account owners to individuals. It
appears that most accounts are currently owned by individuals, but other
entities, such as trusts, including Uniform Gift to Minor Act (UGMA) and
Uniform Transfers to Minors Act (UTMA) accounts and other entities also
are account owners. We note that with regard to trusts, we are not aware
of any potential for abuse, as the funding of trust accounts already
carries transfer tax consequences. We also note that several state 529
plans including Arizona, Kansas, Montana and South Dakota currently
allow for joint ownership of an account. The Arizona program is one of
the qualified tuition programs that has received a private letter ruling
from the IRS confirming its qualification under Section 529. We believe
that there is no reason to prevent trusts and other entities from being
owners of 529 plan accounts and benefiting from the legitimate tax
advantages of 529 plans.

The rule suggested by the ANPR that would make the account owner liable
for income tax on the entire amount of the funds distributed for the
account owner's benefit, to the extent such funds were not contributed
by the account owner themselves, would result in double taxation. Under
this proposal, if the entire distribution including the contribution
portion, on which income tax has already been paid, is subject to
taxation, double taxation of the same funds would result. We feel that
if the distribution is not used for qualified higher education expenses,
taxation of the earnings as ordinary income and the additional 10% of
earnings penalty already serve as a disincentive and therefore the
contribution portion of the distribution should not be taxed. Where the
distribution is actually used for the AO's qualified higher education
expenses, the distribution should be treated no differently than other
qualified distributions.

If your intention is to impose double-taxation of income as a means to
prevent the avoidance of transfer tax, we believe that such approach is
unprecedented and unwarranted. In the vast majority of cases, due to the
gift-tax annual exclusion and the lifetime exemption, the contributor
would not have incurred transfer tax even if events were reconstructed
to recognize all contributions as gifts to the AO. The threat of
double-taxation to the AO would effectively eliminate a popular means
for funding college by family members (grandparents, aunts, uncles,
etc.) who currently make contributions as third parties to 529 accounts
owned by the child's parents.

It is also important to recognize the many reasons that AOs may take
nonqualified distributions that do not involve transfer tax avoidance,
even when contributions to the 529 account are sourced from a third
party. For example, the AO may take distributions to pay for certain
higher-education expenses related to the DB that do not constitute a
qualified expense, such as transportation or personal miscellaneous
expenses.

Our goal is to support the growth of college savings and to that end, we
support clear but user-friendly guidance from Treasury and we welcome
the development of regulations that support our positions as outlined
above.

Feel free to contact us at 585-419-7800 should you wish to discuss
further and if we can participate in further discussions in person in
Washington, D.C. at a time and place convenient for you.

Sincerely,

Joseph F. Hurley, CPA

Founder, Savingforcollege.com

Vice President, Bankrate, Inc.

Christopher A. Stack, Esq.

Managing Consultant

##