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3. Father or mother or ancestor of either. 4. Stepfather or stepmother. 5. Son or daughter of a brother or sister. 6. Brother or sister of father or mother. 7. Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. 8. The spouse of any individual listed above. 9. First cousin. Example. When you graduated from college in Janu- ary last year, you had $5,000 left in your QTP. You wanted to give this money to your younger sibling, who was in jun- ior high school. In order to avoid paying tax on the distri- bution of the amount remaining in your account, you con- tributed the same amount to your sibling's QTP within 60 days of the distribution. If the rollover is to another QTP for the same ben- eficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. See Members of the beneficiary's family, earlier. Example. Assume the same situation as in the last ex- ample. Instead of closing your QTP and paying the distri- bution into your sibling's QTP, you could have instructed the trustee of your account to simply change the name of the beneficiary on the account to that of your sibling. 8. Education Exception to Additional Tax on Early IRA Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 591/2, you must pay a 10% additional tax on the early distribution. This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. See Pub. 560, Retirement Plans for Small Business, for CAUTION ! information on SEP-IRAs, and Pub. 590-B for information about distributions from all other IRAs. However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expen- ses (AQEE), none of the distribution is subject to the addi- tional tax. If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. Who Is Eligible? You can take a distribution from your IRA before you reach age 591/2 and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified ed- ucation expenses for: • Yourself; • Your spouse; • Your or your spouse's child, foster child, or adopted child; or • Your or your spouse’s grandchild. Qualified education expenses. For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. They also include expenses for special needs services incurred by or for special needs students in connection with their en- rollment or attendance. In addition, if the student is at least a half-time student, room and board are qualified education expenses. The expense for room and board qualifies only to the extent that it isn't more than the greater of the following two amounts. 1. The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid pur- poses) for a particular academic period and living ar- rangement of the student. 2. The actual amount charged if the student is residing in housing owned or operated by the eligible educa- tional institution. You may need to contact the eligible educational institu- tion for qualified room and board costs. Eligible educational institution. An eligible educational institution is generally any accredited public, nonprofit, or proprietary (privately owned profit-making) college, uni- versity, vocational school, or other postsecondary educa- tional institution. Also, the institution must be eligible to participate in a student aid program administered by the U.S. Department of Education. Virtually all accredited Page 54 Chapter 8 Education Exception to Additional Tax on Early IRA Distributions