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.