Coverdell ESA rollover: how calc basis "transfer"?

Forum|Forum|3 years ago
May 12, 2022
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Hello!

- We have two Coverdell ESA accounts, one each for two (now older) of my kids;

- I did a partial rollover from one to the other account (i.e. not the whole balance);

- I use the Worksheet 6-3 in IRS Publication 970 to calculate basis each year for each account;

- BUT, in its recipe for basis calculation it seems to Not include a way, for when a rollover has been made, to move basis over from the 'rollover-from' account to the 'rollover-to' account;

- I did the rollover in the middle of the year and after executing distributions for college-ed expenses from both accounts;

- Any advice for how to calculate this, or account for the transfer of basis?

Hal_Al

Employee

You can not roll over the entire basis, leaving only earnings behind. For example, you have $10,000 in the ESA account consisting of $4000 basis and $6000 earnings. You roll over $5000. 40% (4000/10,000) of the $5000 will be basis and 60% (6000/10,000) will be earnings. This all has to be done manually.