Q. Do the 529 funds mean the player must respond that they could be claimed as a dependent on the parent's return?
A. Yes, probably. The treatment of expenses paid with distributions from Sec. 529 plans and Coverdell ESAs in the support test is uncertain because of the dual nature of these college savings vehicles and a lack of IRS guidance. The consensus among tax experts is that it is parental support, because the parent is the owner of the plan. That said, it is helpful to your case that the distribution was made to the beneficiary.
Q. Would this result in having to pay taxes on the unearned income at the parent's rate?
A. It's irrelevant. The kiddie tax kicks in for full time students, under 24, who do not support themselves with earned income, regardless of whether they can be claimed as a dependent.
