My daughter is in her second year of University. I have two 529 plans for her - a prepaid tuition plan and a plan for other qualified expenses (room, board, books).
She receives scholarships that cover about 60% of her tuition/fees, so that much of the prepaid tuition plan can go toward room, board, and books.
She was in an off-campus apartment for the January - May 2012 semester. Since she had scholarships, I asked the prepaid tuition plan to send the amount still available to her apartment landlord directly, and they did.
I subsequently learned that the prepaid college trust has a peculiar policy, whereby if they pay the University directly, or reimburse my daughter, the beneficiary, those funds and gain go on a 1099-Q in her name/SSN. However, if they pay anyone else, as in the case of the apartment landlord, the
1099-Q for that distribution/gain goes to the account owner/SSN, in this case, me.I have a statement showing the check went straight to the landlord. I drew no more funds for room and board than the University's provided off-campus budget.
How do I handle the 1099-Q in my name/SSN? Do I just say that this was for QEEs, and therefore ignore it? I shouldn't have to declare the gain as income as it went to my daughter's QEEs directly; however, the 1099-Q in my name could suggest that the proceeds came to me, and I'm not the student.
Please advise.
Related, I also am taking the American Opportunity Credit, so I have to subtract $4000 from my daughter's AQEE to compute a portion of the gain on her 1099-Q as taxable Other Income on her 1040. How if at all would the
1099-Q in my name affect this? The AOC is for tuition/fees only, and the distribution on my 1099-Q is for room only, so again I feel my return should not be impacted, but I should not include that distribution in my daughter's computations either.