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#44867 - 04/28/09 06:32 PM UTMA/529 with grandparent as custodian - tax treatment
TomF Offline

Registered: 08/21/07
Posts: 9
Joe, I have a situation where the grandmother is the custodian of a UTMA/529. It has been determined that the minor (age 19 in NJ) will not attend college. The grandmother requested a full distribution of the UTMA/529; a non-qualified distribution. On who's tax return does the taxable distribution plus penalty get reported (grandmother or minor beneficiary)? Minor is currently being claimed as a dependent on the minor's parents' tax return.

#44871 - 04/29/09 09:21 AM Re: UTMA/529 with grandparent as custodian - tax treatment [Re: ]
Drew Offline

Registered: 01/09/00
Posts: 2987
Loc: Easton, PA, USA
The tax liability runs with the minor---whomever does his tax returns need to get it correct. I too am impressed that there was a gain--.

Is there a specific reason such as handicap that he will not attend college--in some cases a valid reason abates the penalty.

Do note that custodian is NOT required to distribute the returned funds to minor until age set in UTMA (generally 21) and need not even provide any funds to meet any tax issues --so if GM is being pressed by others to turn over money the correct answer may be go pound sand until he is 21.


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