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1041 for an estate: Received a distribution from a qualified…

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1041 for an estate...

1041 for an estate: Received a distribution from a qualified tuition program. The deceased was not the recipient. How is the distribution treated. There is earnings of 30K. I cannot find anything in IRS that indicates a penalty for early distribution would be applicable

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An estate receives a distribution from a qualified tuition plan. The deceased was not the beneficiary of the tuition plan. The gain is 30K. I have signed up for unlimited use.....for 30 days.

Submitted: 8 months ago.Category: Tax
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9/14/2017
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 2,329
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Hello my name is ***** ***** I will be able to assist you today.

Any part of the earnings that are distributed but not used for higher education is subject to a 10% penalty.

The part of a distribution representing the amount paid or contributed to the qualified tuition plan doesn't have to be included in income. This is a return of the investment in the plan.

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago

There are exceptions to the penalty

Additional Tax on Taxable Distributions

Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income.

Exceptions. The 10% additional tax doesn't apply to the following distributions.

  1. Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary.

  2. Made because the designated beneficiary is disabled. A person is considered to be disabled if he or she shows proof that he or she can't do any substantial gainful activity because of his or her physical or mental condition. A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration.

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago

When the account owner passes, the terms of the 529 plan will control who becomes the new account owner. Some states permit the account owner to name a contingent account owner, who'd assume all rights if the original account owner dies. In other states, account ownership may pass to the designated beneficiary.

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago

Let me know if you require further assistance with this matter.

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Thank you in advance

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago

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