topic Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Where do I indicate the full ride so I'm only taxed normal with no 10% penalty? in Retirement tax questions https://ttlc.intuit.com/community/retirement/discussion/have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-where-do-i/01/1288326#M93769 Sat, 07 Mar 2020 21:10:35 GMT tettnanger1 2020-03-07T21:10:35Z Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Where do I indicate the full ride so I'm only taxed normal with no 10% penalty? https://ttlc.intuit.com/community/retirement/discussion/have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-where-do-i/01/1288326#M93769 Sat, 07 Mar 2020 21:10:35 GMT https://ttlc.intuit.com/community/retirement/discussion/have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-where-do-i/01/1288326#M93769 tettnanger1 2020-03-07T21:10:35Z Re: Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Whe... https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1289823#M93876 <P>You cannot use the purchase of the car in any way shape or form as a qualified&nbsp;educational expense unless the terms of the scholarship specifically state that it can be used for transportation expenses- then you would shift the expense from tuition and apply the Coverdell- but if you do not have evidence&nbsp;to support this (because most scholarships do not), you cannot claim it as such.&nbsp;</P> Sun, 08 Mar 2020 03:31:40 GMT https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1289823#M93876 MaryK1101 2020-03-08T03:31:40Z Re: Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Whe... https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1300535#M94403 <P>Hi,</P><P>&nbsp;</P><P>Thanks for the response, but I'm not talking about using a car as a qualified education expense.&nbsp; I fully realize I have to pay taxes on the distribution (unlike if I used it towards tuition), but I should NOT have to pay a 10% penalty per IRS Pub 970 (<A href="https://www.irs.gov/pub/irs-pdf/p970.pdf" target="_blank">https://www.irs.gov/pub/irs-pdf/p970.pdf</A>), pg. 54 where it says:</P><P>&nbsp;</P><P>===</P><P>Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income.</P><P><STRONG>Exceptions</STRONG>. The 10% additional tax doesn't apply to the following distributions:</P><P>.</P><P>.</P><P>3. Included in income because the designated beneficiary received: a. A tax-free scholarship or fellowship grant (see Tax-Free Scholarships and Fellowship Grants in chapter 1);</P><P>.</P><P>.</P><P>Exception (3) applies only to the extent the distribution isn't more than the scholarship, allowance, or payment.</P><P>===</P><P>&nbsp;</P><P>I received a full scholarship for tuition and room/board.&nbsp; The tuition portion was $21,549.&nbsp; I took a $15,900 Coverdell distribution.&nbsp; I don't think what I took it out for matters as I have to pay taxes on it, I get that.&nbsp; My distribution isn't more than the scholarship, therefore should I not have to pay the 10% penalty on top of taxes as per what&nbsp; Pub 970 says?</P><P>&nbsp;</P><P>thanks!&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P> Tue, 10 Mar 2020 17:42:02 GMT https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1300535#M94403 joshmiller808 2020-03-10T17:42:02Z Re: Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Whe... https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1300632#M94413 <P><STRONG>No.&nbsp;</STRONG>Coverdell IRAs are for qualified<STRONG> education</STRONG> expenses. If you want to claim the exception that the distribution was for tuition, then you should <EM>simultaneously report the scholarship portion that was received that exceeded qualified education expenses</EM>.</P> <P>&nbsp;</P> <P>Please refer to page 5 of <A href="https://www.irs.gov/pub/irs-pdf/p970.pdf" target="_blank">Pub 970</A> which states:</P> <BLOCKQUOTE> <P>A scholarship or fellowship grant is tax free only to the extent:</P> <P>• It doesn't exceed your qualified education expenses;</P> <P>• It isn't designated or earmarked for other purposes (such as room and board), and doesn't require (by its terms) that it can't be used for qualified education expenses; and</P> <P>• It doesn't represent payment for teaching, research, or other services required as a condition for receiving the scholarship.</P> <P>For exceptions, see Payment for services, later. Use Worksheet 1-1 to figure the amount of a scholarship or fellowship grant you can exclude from gross income.</P> </BLOCKQUOTE> <P>&nbsp;</P> Tue, 10 Mar 2020 18:01:33 GMT https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1300632#M94413 KathrynG3 2020-03-10T18:01:33Z
This XML file does not appear to have any style information associated with it. The document tree is shown below.
<rss xmlns:content="http://purl.org/rss/1.0/modules/content/" xmlns:dc="http://purl.org/dc/elements/1.1/" xmlns:rdf="http://www.w3.org/1999/02/22-rdf-syntax-ns#" xmlns:taxo="http://purl.org/rss/1.0/modules/taxonomy/" version="2.0">
<channel>
<title>
topic Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Where do I indicate the full ride so I'm only taxed normal with no 10% penalty? in Retirement tax questions
</title>
<link>
https://ttlc.intuit.com/community/retirement/discussion/have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-where-do-i/01/1288326#M93769
</link>
<description/>
<pubDate>Sat, 07 Mar 2020 21:10:35 GMT</pubDate>
<dc:creator>tettnanger1</dc:creator>
<dc:date>2020-03-07T21:10:35Z</dc:date>
<item>
<title>
Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Where do I indicate the full ride so I'm only taxed normal with no 10% penalty?
</title>
<link>
https://ttlc.intuit.com/community/retirement/discussion/have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-where-do-i/01/1288326#M93769
</link>
<description/>
<pubDate>Sat, 07 Mar 2020 21:10:35 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/retirement/discussion/have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-where-do-i/01/1288326#M93769
</guid>
<dc:creator>tettnanger1</dc:creator>
<dc:date>2020-03-07T21:10:35Z</dc:date>
</item>
<item>
<title>
Re: Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Whe...
</title>
<link>
https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1289823#M93876
</link>
<description>
<P>You cannot use the purchase of the car in any way shape or form as a qualified&nbsp;educational expense unless the terms of the scholarship specifically state that it can be used for transportation expenses- then you would shift the expense from tuition and apply the Coverdell- but if you do not have evidence&nbsp;to support this (because most scholarships do not), you cannot claim it as such.&nbsp;</P>
</description>
<pubDate>Sun, 08 Mar 2020 03:31:40 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1289823#M93876
</guid>
<dc:creator>MaryK1101</dc:creator>
<dc:date>2020-03-08T03:31:40Z</dc:date>
</item>
<item>
<title>
Re: Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Whe...
</title>
<link>
https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1300535#M94403
</link>
<description>
<P>Hi,</P><P>&nbsp;</P><P>Thanks for the response, but I'm not talking about using a car as a qualified education expense.&nbsp; I fully realize I have to pay taxes on the distribution (unlike if I used it towards tuition), but I should NOT have to pay a 10% penalty per IRS Pub 970 (<A href="https://www.irs.gov/pub/irs-pdf/p970.pdf" target="_blank">https://www.irs.gov/pub/irs-pdf/p970.pdf</A>), pg. 54 where it says:</P><P>&nbsp;</P><P>===</P><P>Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income.</P><P><STRONG>Exceptions</STRONG>. The 10% additional tax doesn't apply to the following distributions:</P><P>.</P><P>.</P><P>3. Included in income because the designated beneficiary received: a. A tax-free scholarship or fellowship grant (see Tax-Free Scholarships and Fellowship Grants in chapter 1);</P><P>.</P><P>.</P><P>Exception (3) applies only to the extent the distribution isn't more than the scholarship, allowance, or payment.</P><P>===</P><P>&nbsp;</P><P>I received a full scholarship for tuition and room/board.&nbsp; The tuition portion was $21,549.&nbsp; I took a $15,900 Coverdell distribution.&nbsp; I don't think what I took it out for matters as I have to pay taxes on it, I get that.&nbsp; My distribution isn't more than the scholarship, therefore should I not have to pay the 10% penalty on top of taxes as per what&nbsp; Pub 970 says?</P><P>&nbsp;</P><P>thanks!&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P>
</description>
<pubDate>Tue, 10 Mar 2020 17:42:02 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1300535#M94403
</guid>
<dc:creator>joshmiller808</dc:creator>
<dc:date>2020-03-10T17:42:02Z</dc:date>
</item>
<item>
<title>
Re: Have full ride scholarship and took a distribution from a Coverdell IRA to pay for a car. Whe...
</title>
<link>
https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1300632#M94413
</link>
<description>
<P><STRONG>No.&nbsp;</STRONG>Coverdell IRAs are for qualified<STRONG> education</STRONG> expenses. If you want to claim the exception that the distribution was for tuition, then you should <EM>simultaneously report the scholarship portion that was received that exceeded qualified education expenses</EM>.</P> <P>&nbsp;</P> <P>Please refer to page 5 of <A href="https://www.irs.gov/pub/irs-pdf/p970.pdf" target="_blank">Pub 970</A> which states:</P> <BLOCKQUOTE> <P>A scholarship or fellowship grant is tax free only to the extent:</P> <P>• It doesn't exceed your qualified education expenses;</P> <P>• It isn't designated or earmarked for other purposes (such as room and board), and doesn't require (by its terms) that it can't be used for qualified education expenses; and</P> <P>• It doesn't represent payment for teaching, research, or other services required as a condition for receiving the scholarship.</P> <P>For exceptions, see Payment for services, later. Use Worksheet 1-1 to figure the amount of a scholarship or fellowship grant you can exclude from gross income.</P> </BLOCKQUOTE> <P>&nbsp;</P>
</description>
<pubDate>Tue, 10 Mar 2020 18:01:33 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/retirement/discussion/re-have-full-ride-scholarship-and-took-a-distribution-from-a-coverdell-ira-to-pay-for-a-car-whe/01/1300632#M94413
</guid>
<dc:creator>KathrynG3</dc:creator>
<dc:date>2020-03-10T18:01:33Z</dc:date>
</item>
</channel>
</rss>