This is actually a lot simpler. Because there is excess $ in the 529, we are withdrawing the exact amount of the scholarship. I have already used all of the qualified expenses with other 529 withdrawals, to me. I withdraw the fund and pay all of the expenses. Since her tax rate is lower, and since she had scholarship, I'm generating withdrawals to her to avoid the penalty which would be assessed later in life if we withdraw the money. So, to recap - she paid no qualified expenses, therefore the $28,500 withdrawal equals the scholarship amount. $9996 is the earnings portion, which will not be penalized at 10%, but should be shown on her return as taxable income. I can't figure out what numbers to enter to a) get the income of $9996 to appear, and b) to generate the form 5329. Are you able to help? Thanks again.
