529 as a tax shelter

Hi,

I am planning on the following strategy:

* Maximize contributions to a 529 plan
* As much as possible use investment gains to fund college expenses.
* Withdraw principal tax and penalty free.

Is this a viable strategy? Or am I missing something?

How do I notify the IRS that the college expences portion of the withdrawal should come from the investment gains portion of the savings?

Thanks,
sml

SML

It is not viable. And what you are missing is something you actually mention, more or less.

There is no differentiation of contributions vs. earnings in withdrawals. All withdrawals are pro-rated between the two.

Hope this helps.

TJ