Andrea entered into a § 529 qualified tuition program for the benefit of herdaughter, Joanna. Andrea contributed $15,000 to the fund. The fund balancehad 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 board. So Andrea withdrew the funds from the § 529 plan and boughtJoanna a new car.a. What are the tax consequences to Andrea of withdrawing the funds?b. Assume instead that Joanna’s scholarship did not cover her room and board,which cost $7,500 per academic year. During the current year, $7,500 of thefund balance was used to pay for Joanna’s room and board. The remainingamount was left in the § 529 plan to cover her room and board for future academicyears. What are the tax consequences to Andrea and to Joanna of usingthe $7,500 to pay for the room and board?
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 board. So 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 Joanna’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 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?
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