Roth To 529

[JON]

Client transferred a Roth to a 529 plan. Over 60 and has had Roth for over 5
years. The distribution code is T and it looks like earnings in excess of basis are taxable. That seems to be OK, but find 0 in the Tax Book. If earnings were going to be tax free to client if she would have taken it herself, why is it taxable going to a 529?

Time to retire from this business.

[OldJack]

Why would you think it was taxable? Code "T—Roth IRA distribution, exception applies". Exception applies means it is not taxable.

[veritas]

What?

transferred to a 529? I don't think so. He took a distribution from his Roth IRa which is not taxable. He then put it into a 529 plan which will be non taxable (maybe) if it is only used for education expenses. What is the reasoning for this?

[Kram BergGold]

Wrong code

I would contact payor and have them check to see if they coded 1099 R correctlty.

[JON]

Coded T

My basis was listed as $6000 and should have been $8000 at $6000 it shows 850 as taxable with T. When I chnage to the $8000 all is well, but I would have thought nothing would have been taxable as taxpayer is 61 and Roth more than 5 years ago. Ultra Tax???

[OldJack]

The $850 is shown as taxable since that is probably the gain or earnings in the account, but the code T is saying that your taxpayer does not have to pay tax on the $850 since he meets the exceptions for paying tax on the earnings. Your software should deal with code T by not adding it as taxable to page 1 of the 1040.