Holly entered into a 529 qualified tuition program for the benefit of her daughter, Rebecca. Holly contributed $15,000 to the fund. The fund balance had accumulated to $25,000 by the time Rebecca was ready to enter college. However, Rebecca received a scholarship that paid for her tuiton, fees, books, supplies, and room and board. So Holly withdrew the funds from the 529 plan and bought Rebecca a new car.

A. What are the tax consequences to Holly for withdrawing the funds?

B. Assume instead that Rebecca's scholarship did not cover her room and board, which cost $7,500 per academic year. During the current year, $7,500 of the fund balance was used to pay for Rebeca's room and board. The remaining amount was left in the 529 plan to cover her room and board for future academic years. What are the tax consequences to Holly and to Rebecca for using the $7,500 to pay for the room and board?

Please answer clearly for question A and then question B.