Personal Exemption for child - support requirement

My wife and I have a son who is entering college in fall 2009, and I am considering the pro's and con's of having him take the Hope Credit in 2010. This would require that we not take him as a dependent on
our tax return. I understand that I can freely do so, but if I want him to benefit from his personal exemption he must provide at least half of his own support. I expect he will have a summer job in 2010, but he will otherwise not have any substantial amount of earned income or passive income.
I have a 529 account with my son as the beneficiary (it is not a UTMA 529) and I am the owner. Since the deposits into the 529 account are considered gifts, are the withdrawals considered his funds for purposes of this support requirement?
How about any other assets that we gift to him? I can gift him appreciated securities, which will not only help him provide over half of his own support (giving him the exemption), but the capital gain on the securities will also provide him income against which to apply the exemption and the Hope Credit. Does it matter if I gift him the assets in 2010 and he uses them in the same year? Are they any presumptions on how he uses his assets? For example, if I gift him the assets in 2009 - but he doesn't spend them in 2009 - is there a presumption of any kind around who spent whose funds for particular uses (college costs, support, etc.)?
Thanks.
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On Feb 18, 7:44 pm, snipped-for-privacy@hotmail.com wrote:

Where did you get that from?
http://www.irs.gov/publications/p970/ch02.html#en_US_publink100020766
"The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return."
Furthermore, even if he paid for the education out of his own funds, you still get the credit.
If you didn't claim him on your return and if he claimed himself as an exemption on his return, then only he could take the Hope credit. This might be a good thing to try to do if your income is so high that you can't even take the Hope credit or Tuition and Fees deduction. .

Not sure if this is possible.

No idea about withdrawals from the 529 -- whether they count as support paid by the parent or the child. I imagine it counts as support paid by either, so if the child would like to claim himself as an exemption, then the withdrawal from the 529 should be considered as paid by him. But I'm just guessing here, and could be wrong.
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It seems like OP knows if parent does not claim exemption, that dependent child can claim the Hope, and is debating who should claim the Hope.
If parent has very high income, Hope could be phased out. At higher levels, the deduction is phased out.
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ArtKamlet at a o l dot c o m Columbus OH K2PZH

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snipped-for-privacy@yahoo.com wrote:

There is a small piece of Code that allows the taxpayer who is entitled to the dependency exemption to forgo the exemption allowing the dependent to claim the Hope Credit. The student can not claim a personal exemption as the student is still a dependent, albeit an unclaimed dependent. I've seen this happen often to parents whose income causes the personal exemption to phase-out. The child can include the expenses paid by the child as well as the expenses paid the taxpayer who could have claimed the child.. typically the parent(s).
The same rule holds for the Lifetime Learning Credit.

This is a very good question as the owner has control of the funds yet the contributions count to the annual gift tax exclusion. If the owner directs the distribution go to the beneficiary or the school, the 1099-Q is issued to the beneficiary. If the distribution goes to the owner, the owner gets the 1099-Q. It seems to me, that this would be the determining factor as to who provided the support for education. So if you want to show that the designated beneficiary is self-supporting, I believe you should direct the distribution go to the beneficiary or directly to the school.
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Thanks Alan. You hit the nail on the head. I will request the funds to be distributed from the 529 account in my son's name. I assume you also agree that any funds gifted to him directly (such as appreciated stock) would count toward's his support, as long as he actually spent the money. Right?
Thanks.
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snipped-for-privacy@hotmail.com wrote:

Yes as long as he converts the shares to money and spends those funds on his own support.
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