SIE Exam Practice Question 551

Question: 551

Which of the following will result if money distributed from a 529 plan is not used to pay for qualifying education expenses?

A. The gain is taxed at capital gains rates, and a 10% penalty is applied.

B. The gain is taxed at capital gains rates, and a 20% penalty is applied.

C. The gain is taxed as ordinary income, and a 10% penalty is applied.

D. The gain is taxed as ordinary income, and a 20% penalty is applied.