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M
mattgutz
Level 4
February 21, 2022
Question

Can my client take a distribution from a Coverdell account if he has a full scholarship?

  • February 21, 2022
  • 1 reply
  • 4 views
He has $50,000 in a Coverdell but got a full scholarship.  He withdrew the total Basis of $22,000 and all that is left are the Earnings.  The 1099-Q does not have amounts listed in Box 2 - Earnings or Box 3 - Basis.
Can I allocate the $22,000 distribution to the earnings?
This topic has been closed for replies.

1 reply

T
TaxGuyBill
Level 15
February 21, 2022

No, it needs to be prorated.

https://www.irs.gov/publications/p970#en_US_2021_publink1000178474

 

Don't forget the the taxable portion won't be subject to the penalty due to the scholarships.

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