Jack and Katie have five grandchildren, ages 19, 16, 15, 12, and 10. They have established Coverdell

Question:

Jack and Katie have five grandchildren, ages 19, 16, 15, 12, and 10. They have established Coverdell Education Savings Accounts (CESA) for each of the grandchildren and would like to contribute the maximum amount allowable to each CESA for the 2015 taxable year. Jack and Katie’s AGI for 2015 is $196,000.
a. How much can Jack and Katie contribute to each grandchild’s CESA in 2015?
b. Assume that the 19-year-old granddaughter is a freshman in college and makes a withdrawal of $7,000 from her CESA during the year 2015. Her college expenses for 2015 were as follows:
Tuition ……………………………….. $1,500
Room and board ……………………. 2,500
Books and supplies ………………… 500
The extra amount withdrawn was used as a down payment on a car that the granddaughter purchased during the year. She needed the car in order to drive to school rather than having to either ride the bus or ride with a friend. What are the tax consequences of the $7,000 to the granddaughter?
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...