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#1638 - 10/07/05 11:36 PM 529 Rollover limits
slander1709 Offline
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Registered: 10/07/05
Posts: 12
Assume mom and dad each have a separate 529s for the same beneficiary. Both mom and dad want to rollover the entire balance of their separate accounts into a third, entirely different 529. Does the rollover limit of once per 12 months mean once per account owner or once per beneficiary? (mom and dad opened extra 529s in order to get sign up bonuses and now want to rollover into main 529 account).

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#1639 - 10/08/05 10:27 AM Re: 529 Rollover limits
Joe Hurley Online   content

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Registered: 01/07/00
Posts: 2720
Loc: Pittsford, NY, USA
Once per beneficiary. IRS acknowledges informally that this is a "problem" but so far has not issued anything relaxing this rule.

Joe

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#1640 - 10/13/05 11:40 AM Re: 529 Rollover limits
slander1709 Offline
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Registered: 10/07/05
Posts: 12
Thanks Joe.

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#1641 - 10/13/05 11:57 AM Re: 529 Rollover limits
tjkohler Offline
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Registered: 06/24/04
Posts: 533
Loc: Michigan
But isn't the once a year rollover per bene counted against the account that the money is taken FROM not put into? Thus Mom has account A and Dad has account B. They also have accounts X,Y, and Z that are random accounts they've opend for incentives. Account C is sitting there and will be the account everything is put into. By putting A into C, that uses up A's one rollover this year. Then put B into C, using B's one rollover this year. Do the same for X,Y, and Z into C. I thought this was legal in one year?

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#1642 - 10/13/05 12:59 PM Re: 529 Rollover limits
Joe Hurley Online   content

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Registered: 01/07/00
Posts: 2720
Loc: Pittsford, NY, USA
Here's the wording in Code Sec. 529(c)(3)(C)(iii):

 Quote:
[A transfer is not a rollover if] such transfer occurs within 12 months from the date of a previous transfer to any qualified tuition program for the benefit of the designated beneficiary.


From what I can tell, this restriction is not on a per-account basis.

Joe

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#1643 - 10/22/05 12:58 AM Re: 529 Rollover limits
slander1709 Offline
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Registered: 10/07/05
Posts: 12
Assuming the rollover does not qualify for the once a year exception, then its considered a distribution that's taxed, correct? Who owes the tax, beneficiary or account owner? If it's the beneficiary, perhaps extra rollovers don't matter so much if the child has no income and the amount involved is relatively small. Or am I missing something?

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#1644 - 10/23/05 09:13 AM Re: 529 Rollover limits
Joe Hurley Online   content

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Registered: 01/07/00
Posts: 2720
Loc: Pittsford, NY, USA
Yes, a nonqualifying rollover would be taxed as a distribution. It would be taxed to the person who receives the 1099-Q from the 529 plan. If the nonqualifying rollover was a distribution to the beneficiary followed by a contribution to a new 529 plan within 60 days, then the 1099-Q should go to the beneficiary. If the distribution was to the account owner, or if it was a direct trustee-to-trustee rollover, then the 1099-Q should go to the account owner.

Even if the 1099-Q goes to the beneficiary without any other income (thus low tax or no tax on the 529 earnings), the 10% penalty on earnings will still apply.

Joe

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