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Tax Law (Questions About Taxes)/Is transfer from Child's Custodial Acc to 529 taxable


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 (UGMA)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? This was for the 2011 tax year. 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.


Thanks for your question.

Generally speaking a transfer/rollover of a UGMA to a 529 plan is a taxable event, especially since you withdrew the funds rather than doing a direct rollover into the 529.

Since the institution holding the investments did not know (officially) what you did with the funds, they do not know if it is a taxable event or not.

There are exceptions to this transaction being tax free, but since I do not have all the details I can't advise you further in this regard.  Most likely, since the transaction has been completed, it will be taxable.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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