The person who receives the funds and whose Social Security number on the form has to report the 1099-Q on their tax return. As the IRS will also be receiving a copy of the form, you must report it correctly so to match their record to avoid IRS correspondence.
If the form is issued in your name and your socials security number, you should report it on your return. As there is an excess distribution of $12,500 (20K-7500), it is considered a "non-qualified" distribution since there was not tuition amounts matching the distribution. There will a tax penalty applies to the entire excess distribution, and the earnings will be added to income. Your basis is a return of contribution and is not taxed. You do not attribute the distribution to the basis in the calculation. For more information, click here: Form 1099Q
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