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Note. If you are required to allocate your expenses be- tween Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary educa- tion expenses, see the examples in chapter 6 under Coor- dination With Qualified Tuition Program (QTP) Distribu- tions. Losses on QTP Investments For tax years beginning after 2017 and before 2026, if you have a loss on your investment in a QTP account, you can’t claim the loss on your income tax return. You have a loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Your basis is the total amount of con- tributions to that QTP account. The aggregation rules that applied if you had dis- tributions from more than one QTP account dur- ing a year were eliminated for distributions after 2014. For more information, see Notice 2016-13, available at IRS.gov/IRB/2016-07_IRB#NOT-2016-13. Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you must also pay a 10% additional tax on the amount included in income. Exceptions. The 10% additional tax doesn't apply to the following distributions. 1. Paid to a beneficiary (or to the estate of the designa- ted beneficiary) on or after the death of the designa- ted beneficiary. 2. Made because the designated beneficiary is disabled. A person is considered to be disabled if he or she shows proof that he or she can't do any substantial gainful activity because of his or her physical or men- tal condition. A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. 3. Included in income because the designated benefi- ciary received: a. A tax-free scholarship or fellowship grant (see Tax-Free Scholarships and Fellowship Grants in chapter 1); b. Veterans' educational assistance (see Veterans' Benefits in chapter 1); c. Employer-provided educational assistance (see chapter 10); or d. Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. This exception only applies to the extent the distri- bution isn't more than the scholarship, allowance, or payment. CAUTION ! 4. Made on account of the attendance of the designated beneficiary at a U.S. military academy (such as the USNA at Annapolis). This exception applies only to the extent that the amount of the distribution doesn't exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U.S. Code) at- tributable to such attendance. 5. Included in income only because the qualified educa- tion expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits, earlier). Figuring the additional tax. Use Part II of Form 5329 to figure any additional tax. Report the amount on Schedule 2 (Form 1040), line 8. Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another or from a QTP to an ABLE account. In addition, the designated beneficiary can be changed without trans- ferring accounts. Rollovers Any amount distributed from a QTP isn't taxable if it's rol- led over to either: • Another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse), or • An ABLE account for the benefit of the same benefi- ciary or for the benefit of a member of the beneficiary’s family (including the beneficiary’s spouse). But this doesn’t apply to the extent the amount distributed when added to other amounts contributed to the ABLE account exceeds the annual contribution limit. For more information about ABLE accounts, see Pub. 907, Tax Highlights for Persons With Disabilities. You should contact the qualified ABLE program before contributing any funds to the ABLE ac- count to ensure that the contribution limit will not be exceeded. An amount is rolled over if it's paid to an ABLE account or another QTP within 60 days after the date of the distri- bution. Don't report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040, 1040-SR, or 1040-NR. These aren't taxable distributions. Members of the beneficiary's family. For these purpo- ses, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. 1. Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. 2. Brother, sister, stepbrother, or stepsister. CAUTION ! Page 54 Chapter 7 Qualified Tuition Program (QTP)