Good try, Caddie. If I make a $14,000 contribution to a 529 plan for your son, the IRS treats this as a $14,000 gift. (Also, the 10% penalty is only on gains and not the basis.) Sorry, but if you give me money and I'm supposed to give a gift of an equal amount, it won't be treated as a gift. Like I said, there are easier (and legitimate) ways to do this.