IRA penalty exception for higher education

[Jesse]

Forgive me if this questions seems stupid and I haven't done research but.......

Have a client that took $20,000 out of IRA to pay for higher education expenses for 2008 and 2009. Took the money out in 2008 and paid for related expenses less than the $20,000, with the remainder paid in January of 2009.

Since the money was taken out in 2008 will the exception apply to only the expenses paid for in 2008?

[S T]

Try this

Here is the link to Pub 970 http://www.irs.gov/publications/p970/ch09.html and probably will find your answer.

I think maybe it is when the education expenses were paid. Could be your client should have taken two distributions one in 2008 and one in 2009.

Sandy

[New York Enrolled Agent]

Forgive me if this questions seems stupid and I haven't done research but.......

Have a client that took $20,000 out of IRA to pay for higher education expenses for 2008 and 2009. Took the money out in 2008 and paid for related expenses less than the $20,000, with the remainder paid in January of 2009.

Since the money was taken out in 2008 will the exception apply to only the expenses paid for in 2008?

The distribution from the IRA MUST be in the same year as the year the expenses were paid to qualify for an exception to the 10% penalty.
See TC Memo 2005-162

[Jesse]

Thanks to both of you for the information.