529 to ROTH rollover ?

[RWG1950]

Grandparent / owner started 529 for grandchild more than 15 years ago. Grandchild has completed post-secondary ed. and is now
working full-time. $9,145 (cost 5,328) remains in the account. As I understand this, the grandparent / owner can :
1. continue to hold the account. 2. cash it in and pay the tax and 10% penalty on gain. 3. roll it (over 2 years) to a Roth IRA for the grandchild.
How does the cost basis and deferred gain enter into this when an election to allow rollover to Roth IRA is made ?
Thanks for comments.

[Lion]

https://www.journalofaccountancy.com/news/2023/mar/saving-college-new-529-to-roth-irs-transfer-rule.html

Regs are expected this fall to deliver some answers.

[Rapid Robert]

Check The Tax Book news update released in January 2023. Yes, a rollover distribution is tax free as long as it doesn't exceed the basis as of five years prior (and earnings on that basis), in other words you can't back-load the account right before making a qualified rollover distribution.

You also left one possibility off your list -- the owner can change the QTP beneficiary to a relative of the current beneficiary.

Effective for distributions after December 31, 2023, the new law allows for a
special tax-free rollover to a Roth IRA from a long-term qualified tuition program. A
long-term QTP is one that has been maintained for the 15-year period ending on the date
of the distribution. The rollover distribution is tax free if:
1) It does not exceed the aggregate amount contributed to the program (and earnings
attributable to the contributions) before the 5-year period ending on the date of the
distribution, and
2) It is paid in a direct trustee-to-trustee transfer to a Roth IRA maintained for the benefit
of the QTP designated beneficiary.