Which of the following is a tax advantage of a Section 529 Qualified Tuition Program compared to a Coverdell ESA?

Answer options:

Contributions are federally tax-deductible.

There are no income phase-out limits for contributors.

Funds can be used for K-12 expenses without limit.

Investment control remains fully with the contributor.

How to approach this question

Recall the contribution rules. Coverdell ESAs have AGI phase-outs preventing high earners from contributing. 529 plans do not have income limits for contributors.

Full Answer

B.There are no income phase-out limits for contributors.✓ Correct

IRC §529 vs §530. Coverdell ESAs (IRC §530) have contribution limits phased out at higher AGI levels. Section 529 plans do not have income limitations for contributors.

Common mistakes

Assuming contributions are federally deductible (they are often state deductible, but not federal).

Question 15 All questions Question 17

Practice the full CPA TCP Practice Exam 3

68 questions · hints · full answers · grading

More questions from this exam

Q01In Year 1, an executive is granted 1,000 Incentive Stock Options (ISOs) with an exercise price of...Medium Q02On January 1, Year 1, a corporation lends $500,000 to a shareholder interest-free. The loan is a ...Medium Q03A taxpayer has regular taxable income of $200,000 in Year 1. They claimed a standard deduction of...Medium Q04A U.S. citizen accepts a permanent assignment in France on January 1, Year 1. They are present in...Medium Q05A 12-year-old child has $5,000 of interest income and no earned income in Year 1. Assume the stan...Hard

View all 68 questions →