Parental Assistance for Tuition Investment Act of 1987

Title I: Establishment of National Postsecondary Education Trust - Parental Assistance for Tuition Investment Act of 1987 - Establishes the National Postsecondary Education Trust.

Creates a Board of Trustees of the Trust, to be composed of: (1) the Secretaries of Education and the Treasury, serving ex officio; and (2) five representatives of postsecondary education institutions and five members of the general public (not more than half of whom may be from the same political party), who shall be appointed by the President, by and with the advice and consent of the Senate.

Creates under the jurisdiction and control of the Board an Advance Tuition Payment Fund.

Sets forth the general duties of the Board, including holding the funds of the Trust, establishing necessary policy and procedures for operating the Trust, paying money directly to postsecondary institutions, collecting necessary fees for its operation, imposing reasonable time limits on use of tuition benefits, and other related administrative matters.

Directs the Secretary of the Treasury, as Managing Trustee, to invest portions of Fund moneys in interest-bearing obligations of the United States or in obligations guaranteed by the United States.

Sets forth restrictions on uses of the Fund.

Requires the Board to make annual reports to the Congress.

Allows a purchaser to enter into an agreement with the Trust, on behalf of itself and the Federal Government, for the purchase of an advance tuition payment plan for use by a qualified beneficiary to pay a portion of the costs of tuition and fees required to attend a postsecondary education institution to which the qualified beneficiary is admitted.

Sets forth required contents and design of advance tuition payment plan agreements. Directs the Trust to provide that a purchaser may purchase an advance payment tuition plan for an eligible beneficiary at any time following the beneficiary's birth.

Sets forth conditions for termination of agreements and for refunds upon termination.

Sets forth certain restrictions.

Authorizes appropriations. Provides that at such time as the Trust is capable of self-support the annual report shall indicate no need for subsequent appropriations.

Title II: Tax Treatment of Advance Tuition Payment Plans - Amends the Internal Revenue Code to allow a tax deduction in an amount equal to the amount paid in cash during the year to the National Postsecondary Education Trust pursuant to any advance tuition payment plan agreement.

Allows such deduction only if: (1) the taxpayer is the qualified beneficiary under the agreement and is not the dependent of another taxpayer; or (2) the taxpayer is entitled to a deduction with respect to the qualified beneficiary under such agreement for the taxable year.

Limits maximum deductible payments per beneficiary to $2,000 for any taxable year and $48,000 for all taxable years. Sets forth certain adjustable gross income limitations above which such maximum deductible amounts are to be reduced.

Disallows such deduction for the taxable year in which the beneficiary dies or attains age 25 or for any year thereafter. Disallows such deduction to a taxpayer who is a dependent of another taxpayer. Disallows such deduction with respect to a beneficiary who is the spouse of the taxpayer, unless the taxpayer is entitled to an exemption for the spouse and files a joint return.

Deems payments to an advance tuition payment plan agreement as payments for the preceding taxable year if they are made not later than the time prescribed by law for filing the return.

Provides that the deduction for payment under advance tuition payment plan agreements is also allowable to taxpayers who do not itemize deductions.

Excludes from gross income any amount paid from the National Postsecondary Education Trust to any postsecondary education institution pursuant to any advance tuition payment plan agreement. Includes in the gross income of the person to whom the amount is paid any other amount paid from the National Postsecondary Education Trust which is not described in the preceding sentence. Adds a ten percent penalty tax for such refunds from the Trust, except where the beneficiary under the agreement dies.