Distributions for qualified higher education expenses
For purposes of this paragraph—
(i) In-kind distributions
(i)In-kind distributions#
No amount shall be includible in gross income under subparagraph (A) by reason of a distribution which consists of providing a benefit to the distributee which, if paid for by the distributee, would constitute payment of a qualified higher education expense.
(ii)Cash distributions#
In the case of distributions not described in clause (i), if—
(I) such distributions do not exceed the qualified higher education expenses (reduced by expenses described in clause (i)), no amount shall be includible in gross income, and
(II) in any other case, the amount otherwise includible in gross income shall be reduced by an amount which bears the same ratio to such amount as such expenses bear to such distributions.
(ii)(I)#
such distributions do not exceed the qualified higher education expenses (reduced by expenses described in clause (i)), no amount shall be includible in gross income, and
(ii)(II)#
in any other case, the amount otherwise includible in gross income shall be reduced by an amount which bears the same ratio to such amount as such expenses bear to such distributions.
(iii)Exception for institutional programs#
In the case of any taxable year beginning before January 1, 2004 , clauses (i) and (ii) shall not apply with respect to any distribution during such taxable year under a qualified tuition program established and maintained by 1 or more eligible educational institutions.
(iv)Treatment as distributions#
Any benefit furnished to a designated beneficiary under a qualified tuition program shall be treated as a distribution to the beneficiary for purposes of this paragraph.
(v)Coordination with American Opportunity and Lifetime Learning credits#
The total amount of qualified higher education expenses with respect to an individual for the taxable year shall be reduced—
(I) as provided in section 25A(g)(2), and
(II) by the amount of such expenses which were taken into account in determining the credit allowed to the taxpayer or any other person under section 25A.
(v)(I)#
as provided in section 25A(g)(2), and
(v)(II)#
by the amount of such expenses which were taken into account in determining the credit allowed to the taxpayer or any other person under section 25A.
(vi)Coordination with Coverdell education savings accounts#
If, with respect to an individual for any taxable year—
(I) the aggregate distributions to which clauses (i) and (ii) and section 530(d)(2)(A) apply, exceed
(II) the total amount of qualified higher education expenses otherwise taken into account under clauses (i) and (ii) (after the application of clause (v)) for such year,
(vi)(I)#
the aggregate distributions to which clauses (i) and (ii) and section 530(d)(2)(A) apply, exceed
(vi)(II)#
the total amount of qualified higher education expenses otherwise taken into account under clauses (i) and (ii) (after the application of clause (v)) for such year,
the taxpayer shall allocate such expenses among such distributions for purposes of determining the amount of the exclusion under clauses (i) and (ii) and section 530(d)(2)(A).