Andrea entered into a 529 qualified tuition program for the benefit of her daughter, Joanna. Andrea
Question:
Andrea entered into a § 529 qualified tuition program for the benefit of her daughter, Joanna. Andrea contributed $15,000 to the fund. The fund balance had accumulated to $25,000 by the time Joanna was ready to enter college. However, Joanna received a scholarship that paid for her tuition, fees, books, supplies, and room and Ixiard. Therefore, Andrea withdrew the funds from the § 529 plan and bought Joanna a new car.
a. What are the tax consequences to Andrea of withdrawing the funds?
b. Assume instead that Joannas 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 Joanna’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 Andrea and to Joanna of using the $7,500 to pay for the room and board?
Step by Step Answer:
South-Western Federal Taxation 2018 Comprehensive
ISBN: 9781337386005
41st Edition
Authors: David M. Maloney, William H. Hoffman, Jr., William A. Raabe, James C. Young