Thanks for the reply and link. The example in the link outlines the problem I am questioning:
"Assume there is no further appreciation in the account and you withdraw $5,000 in the Fall to pay for the first semester college bills."
My point is that it appears that the Worksheet B for question 45 is speciffically asking for the 529 distribution "paid on your behalf" of $5,000. Won't this in fact have to be included as a income item and penalized by the formula on a $0.50 on the dollar above the $2,500 income (approx) threshold?
If not, please provide details as to why not.
These plans are ripe to wipe out needs based aid in the Sophomore years and beyond if the above is correct...
Thanks in advance to whoever has a definitive documentable answer.