Higher Education Expenses Qualifications

L1: Higher Education Expenses QualificationsPerson on 72t. Has been taking /- and extra $25,000 per year for daughters college. He wants an additional distribution this year to pay for her new apartment and to buy furniture, dishes, etc. Is this allowed?2006-09-08 08:11, By: Kim, IP: [24.172.244.211]
L2: Higher Education Expenses QualificationsHello Kim:
There are a couple of issues here:
(1) If the $25,000 or so being distributed for the daughter’s education is coming from the same IRA as are the SEPP distributions; then, the SEPP plan, in my opinion, is already busted as it has violated Rev. Rule 2002-62. Conversely, if the $25,000 is coming from a different IRA, then that distribution and the SEPP plan are probably fine.
(2) Now, onto apartment costs. IRC 529(e)(3) limits the room and board (for a full time student) distribution allowance to essentially whatever the educational institution charges for a dorm room and a meal plan. To the extent that apartment rent and groceries are less than this amount, it will be fine. If greater, then only take out what the educational institution charges. Furniture, dishes, etc.; e.g. those things that look more like one-time / capital expenditures are not allowed.
TheBadger
wjstecker@wispertel.net2006-09-08 08:24, By: TheBadger, IP: [72.42.67.67]