Hi Amy,
I am still a little confused. I have accepted the fact that, since the distributions are going to school expenses for a school not on the Dept of Education list, they will be taxable minus the basis.
I did look at the rules referenced in point 3, but I didn't see how to make her the owner of the account. Honestly, I want to retain ownership; is there a way to make a distribution to the benefit of my daughter, and have her be the one paying the tax? I ask, since that seems to be a possible option from the following sentence: "However, the account owner (such as a parent) will receive the 1099-Q instead if the distributions from a 529 plan aren’t made directly to the beneficiary..." It seems like one can make distributions direct to the beneficiary.
Does it make any difference pulling money from a 529 or a Coverdell? I can move money freely between those accounts set up for her benefit.
Also, will there be an additional 10% penalty over the taxes due, even though she is actually going to a school? It is not clear - especially since she is really in a school, just not in the US or on the approved list of foreign schools. It seems really harsh to have saved all these years and then pay a penalty under these circumstances; I can accept paying tax - like I would have all along - but an extra 10% penalty is really hard to swallow
