I had a UTMA in my daughter's name. Last year I closed this account and transfered the assets into a 529 account. The mutual fund sent me a 1099-R with the proceeds. Is there a tax consequence because of this? All the proceeds were used to open the 529 account, so is there still a tax liability due?
Where on the Federal tax form do I declare this? Or is this another form? Thanks. Mark Sabatini
25+ years in this business I've never heard of a 1099-R being issued in regards to an UTMA account. Are you SURE about it being a 1099-R? The R stands for RETIREMENT.
Gene E. Utterback, EA, RFC, ABA
I suspect it's a 1099-B, not a 1099-R. Yes, there's a tax consequence even though the proceeds went into a 529.
Your daughter must file a return, reporting the sale on Schedule D. In calculating the tax she must take into account the "kiddie tax" provisions.
See the 1040 instructions.
Is this legal? If the OP is the owner of the 529, with the right to change the beneficiary, didn't he just take money (the UTMA money) away from its legal owner, even though she is a minor? JOE
Beats me. Legal or not, it's gross income to her.
It's the daughter's money, but he's the trustee. Is it prohibited that someone can set up a 529 plan for himself?
Stu
The issue is that the assets in a "normal" 529 plan belong to the participant, NOT the beneficiary. The participant can change the beneficiary at any time and can take the money out at any time for any reason (paying the 10% penalty on earnings if the money wasn't used for a qualified purpose).
However, a 529 plan can be nested in an UTMA. If this is done, the participant is only a custodian and the assets belong irrevocably to the beneficiary.
So if the OP is doing this on the up-and-up, he should open a UTMA-ized 529 and transfer the UTMA monies into the UTMA/529.
-- Rich Carreiro snipped-for-privacy@rlcarr.com
I am the OP. The UTMA existed with T.Rowe Price. Last year I transfered the proceeds to a Maryland College Inv Plan 529 also managed by TRP. They issued me a 1099-B (not 1099-R as I originally said). And the owner of the 529 is still my daughter. I am only the custodian. So in a sense it is a utma/529 account. And the account has my name FBO my daughter. The questions I had were
- since all the proceeds were rolled over into the 529, is there still a tax liability? The answer seems to be, yes.
- does my daughter have to file her own tax return, or can I attach a
8814 for her to my own return? The 1099-B has the short/long term gross proceeds and the short/longterm gains. Thanks Mark Sabatini========================================= MODERATOR'S COMMENT: yes, this is taxable even though put into a 529 plan. And a 1099-B reporting sales like this disqualifies you from listing her income on your return. She files her own return and may have kiddie tax.
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