Our bank surrendered my children's Certificate of Deposit's purchased by their grandfather (for their education expenses) due to "lack of activity" to the Unclaimed Property Division of the Michigan Dept. of Treasury. My son's CD was refunded with interest totalling $24.12. My daughter's was refunded without any interest. I, in turn, deposited both refunds (in their entirety) in each of their established MESP "529" accounts.
Do they need to report the total amount refunded to each by the State as "other reportable income" on their federal and state tax returns, or does just my son need to report the interest amount, even though he didn't receive a 1099-INT from the State of MI?
Are both children liable for interest earned on the original value of their CD while it was in possession of the bank?
