This is really confusing to me. If both distributions were taken from the 529 as "unqualified" shouldnt they both be treated the same way? Im not understanding how one has enough to cover the distribution and the other does not. However I still return to the "unqualified distribution" issue. We specifically took the amount out only of the scholarship, knowing we would pay taxes but not penalties. Separately, could we actually have taken a larger distribution?
Also daughter #2 did have separate room and board (daughter #1 r&B expenses are included in 1098t box 1), but since I when I made the withdrawl from the 529, i marked it "unqualified" couldnt this present a problem if I then enter that to eliminate the tax burden?
Also we do not pay the tuition. Another family member does so wouldnt it be "cheating"?
