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Auditing/Transferring from UGMA to 529 Plan


My daughter received a notice from the IRS that she owes back taxes on what they think was a redemption of funds from a UNIF account in which I am the trustee. What occurred was that the shares were indeed redeemed but immediately upon receiving that check I wrote one for the exact amount as a contribution to a 529 plan. Would that be considered a rollover and not subject to tax? I'm sure we did not receive a 1099 statement saying it was taxable, otherwise we would either have declared it on her tax return or contacted the mutual fund for a clarification.

Because the check was cashed the IRS has no idea where the money went. I would make copies of everything including the statement showing the funds deposited in the account and send it in to the IRS with a letter explaining how things went. The IRS should accept your explanation, but it is not 100% because the UNIF was cashed in and a "new" account started.  


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Richard S


Questions about the collection of taxes. I spent ten years in Collections and tax return review with the IRS and spoke with over 20,000 people. I worked with people to solve problems with their tax levies, liens, Offer in Compromise, unfiled tax returns, payment/filing options and general questions.


Over 10 years with the IRS - recently retired. Handled thousands of cases - mostly for regular people that owed anywhere from a few hundred dollars to over $100,000.

Masters Degree from Iowa State in Ames.

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