Discussion:529 Distribution to Non-Beneficiary
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| {{ForumReplyPost|UserID=RoyDaleOne|Date=4 April 2008|Text=http://www.taxalmanac.org/index.php/Discussion:1099Q_Issued_to_taxpayer_%28non_beneficiary%29}} | {{ForumReplyPost|UserID=RoyDaleOne|Date=4 April 2008|Text=http://www.taxalmanac.org/index.php/Discussion:1099Q_Issued_to_taxpayer_%28non_beneficiary%29}} | ||
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| + | {{ForumReplyPost|UserID=Taxwizard|Date=4 April 2008|Text=Jan, I will answer for Riley2. The distributee (not always the same as the designated beneficiary) will not include the distribution in income as long as the designated beneficiary's qualified higher educational expenses are more than the distribution. See Sec. 529(c)(3)(B)(ii). | ||
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| + | Also, remember that the qualified higher educational expenses for purposes of Sec. 529 must be reduced by any expenses used to qualify for the Hope Credit or the Lifetime Learning Credit.}} | ||
Revision as of 07:49, 4 April 2008
Discussion Forum Index --> Tax Questions --> 529 Distribution to Non-Beneficiary
Msmith7305 (talk|edits) said: | 3 March 2006 |
| Father maintains 2 529 plans for his 2 college student sons. Dad pays all the education costs and then takes distribution from each son's plan to reimburse himself for costs. 1099s go to Dad and are marked as being to non-beneficiary. Dad's income is too high to receive any education benefits. Dad's income is too high to get any personal exemptions. His sons have to file tax returns which will show a tax liability. Are there any issues that would keep Dad from not claiming sons on his return and passing on education benefits to his children? The kids of course would file as being a dependent (but not actually claimed) and would therefore not take the personal exemption. I guess what throws me with all this is that the 1099s from the 529 plans have Dad's social security number on them. Qualified education costs far exceed the amounts needed to claim education credits/deductions and (with room and board) still exceed the 529 distribution.
Thanks | |
| 5 March 2006 | |
| Dad will need to recognize income if the qualified educational expenses of the designated beneficiary are lower than the 529 distributions from that particular account. I see no problem with the sons claiming the educational credits for the amounts of qualified expenses that are not used as 529 qualified expenses. | |
Msmith7305 (talk|edits) said: | 5 March 2006 |
| Thanks Riley2! QEE are far higher than 529 distribution. | |
| 2007-03-27 | |
| Riley2, do you perchance have a reference for this conclusion? Everything I can find indicates that Dad will pay income tax, as well as the 10% penalty, on all of the earnings, because he is not the designated beneficiary nor were the payments made directly to the institution(s). I'd love to find something official that says otherwise! | |
RoyDaleOne (talk|edits) said: | 4 April 2008 |
| http://www.taxalmanac.org/index.php/Discussion:1099Q_Issued_to_taxpayer_%28non_beneficiary%29 | |
| 4 April 2008 | |
| Jan, I will answer for Riley2. The distributee (not always the same as the designated beneficiary) will not include the distribution in income as long as the designated beneficiary's qualified higher educational expenses are more than the distribution. See Sec. 529(c)(3)(B)(ii).
Also, remember that the qualified higher educational expenses for purposes of Sec. 529 must be reduced by any expenses used to qualify for the Hope Credit or the Lifetime Learning Credit. | |
