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2009 Turbo Tax

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2009 Turbo Tax

2009 turbo tax 7. 2009 turbo tax   Figuring Gross Profit Table of Contents Introduction Items To Check Testing Gross Profit AccuracyExample. 2009 turbo tax Additions to Gross Profit Introduction After you have figured the gross receipts from your business (chapter 5) and the cost of goods sold (chapter 6), you are ready to figure your gross profit. 2009 turbo tax You must determine gross profit before you can deduct any business expenses. 2009 turbo tax These expenses are discussed in chapter 8. 2009 turbo tax If you are filing Schedule C-EZ, your gross profit is your gross receipts plus certain other amounts, explained later under Additions to Gross Profit. 2009 turbo tax Businesses that sell products. 2009 turbo tax   If you are filing Schedule C, figure your gross profit by first figuring your net receipts. 2009 turbo tax Figure net receipts (line 3) on Schedule C by subtracting any returns and allowances (line 2) from gross receipts (line 1). 2009 turbo tax Returns and allowances include cash or credit refunds you make to customers, rebates, and other allowances off the actual sales price. 2009 turbo tax   Next, subtract the cost of goods sold (line 4) from net receipts (line 3). 2009 turbo tax The result is the gross profit from your business. 2009 turbo tax Businesses that sell services. 2009 turbo tax   You do not have to figure the cost of goods sold if the sale of merchandise is not an income-producing factor for your business. 2009 turbo tax Your gross profit is the same as your net receipts (gross receipts minus any refunds, rebates, or other allowances). 2009 turbo tax Most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way. 2009 turbo tax Illustration. 2009 turbo tax   This illustration of the gross profit section of the income statement of a retail business shows how gross profit is figured. 2009 turbo tax Income Statement Year Ended December 31, 2013 Gross receipts $400,000 Minus: Returns and allowances 14,940 Net receipts $385,060 Minus: Cost of goods sold 288,140 Gross profit $96,920   The cost of goods sold for this business is figured as follows: Inventory at beginning of year $37,845 Plus: Purchases $285,900   Minus: Items withdrawn for personal use 2,650 283,250 Goods available for sale $321,095 Minus: Inventory at end of year 32,955 Cost of goods sold $288,140 Items To Check Consider the following items before figuring your gross profit. 2009 turbo tax Gross receipts. 2009 turbo tax   At the end of each business day, make sure your records balance with your actual cash and credit receipts for the day. 2009 turbo tax You may find it helpful to use cash registers to keep track of receipts. 2009 turbo tax You should also use a proper invoicing system and keep a separate bank account for your business. 2009 turbo tax Sales tax collected. 2009 turbo tax   Check to make sure your records show the correct sales tax collected. 2009 turbo tax   If you collect state and local sales taxes imposed on you as the seller of goods or services from the buyer, you must include the amount collected in gross receipts. 2009 turbo tax   If you are required to collect state and local taxes imposed on the buyer and turn them over to state or local governments, you generally do not include these amounts in income. 2009 turbo tax Inventory at beginning of year. 2009 turbo tax   Compare this figure with last year's ending inventory. 2009 turbo tax The two amounts should usually be the same. 2009 turbo tax Purchases. 2009 turbo tax   If you take any inventory items for your personal use (use them yourself, provide them to your family, or give them as personal gifts, etc. 2009 turbo tax ) be sure to remove them from the cost of goods sold. 2009 turbo tax For details on how to adjust cost of goods sold, see Merchandise withdrawn from sale in chapter 6. 2009 turbo tax Inventory at end of year. 2009 turbo tax   Check to make sure your procedures for taking inventory are adequate. 2009 turbo tax These procedures should ensure all items have been included in inventory and proper pricing techniques have been used. 2009 turbo tax   Use inventory forms and adding machine tapes as the only evidence for your inventory. 2009 turbo tax Inventory forms are available at office supply stores. 2009 turbo tax These forms have columns for recording the description, quantity, unit price, and value of each inventory item. 2009 turbo tax Each page has space to record who made the physical count, who priced the items, who made the extensions, and who proofread the calculations. 2009 turbo tax These forms will help satisfy you that the total inventory is accurate. 2009 turbo tax They will also provide you with a permanent record to support its validity. 2009 turbo tax   Inventories are discussed in chapter 2. 2009 turbo tax Testing Gross Profit Accuracy If you are in a retail or wholesale business, you can check the accuracy of your gross profit figure. 2009 turbo tax First, divide gross profit by net receipts. 2009 turbo tax The resulting percentage measures the average spread between the merchandise cost of goods sold and the selling price. 2009 turbo tax Next, compare this percentage to your markup policy. 2009 turbo tax Little or no difference between these two percentages shows that your gross profit figure is accurate. 2009 turbo tax A large difference between these percentages may show that you did not accurately figure sales, purchases, inventory, or other items of cost. 2009 turbo tax You should determine the reason for the difference. 2009 turbo tax Example. 2009 turbo tax   Joe Able operates a retail business. 2009 turbo tax On the average, he marks up his merchandise so that he will realize a gross profit of 331/3% on its sales. 2009 turbo tax The net receipts (gross receipts minus returns and allowances) shown on his income statement is $300,000. 2009 turbo tax His cost of goods sold is $200,000. 2009 turbo tax This results in a gross profit of $100,000 ($300,000 − $200,000). 2009 turbo tax To test the accuracy of this year's results, Joe divides gross profit ($100,000) by net receipts ($300,000). 2009 turbo tax The resulting 331/3% confirms his markup percentage of 331/3%. 2009 turbo tax Additions to Gross Profit If your business has income from a source other than its regular business operations, enter the income on line 6 of Schedule C and add it to gross profit. 2009 turbo tax The result is gross business income. 2009 turbo tax If you use Schedule C-EZ, include the income on line 1 of the schedule. 2009 turbo tax Some examples include income from an interest-bearing checking account, income from scrap sales, income from certain fuel tax credits and refunds, and amounts recovered from bad debts. 2009 turbo tax Prev  Up  Next   Home   More Online Publications
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The 2009 Turbo Tax

2009 turbo tax 8. 2009 turbo tax   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. 2009 turbo tax Half-time student. 2009 turbo tax How Much Can You Contribute Are Distributions TaxableFiguring the Taxable Portion of a Distribution Additional Tax on Taxable Distributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Introduction Qualified tuition programs (QTPs) are also called “529 plans. 2009 turbo tax ” States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. 2009 turbo tax Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. 2009 turbo tax If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. 2009 turbo tax You cannot deduct either payments or contributions to a QTP. 2009 turbo tax For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. 2009 turbo tax What is the tax benefit of a QTP. 2009 turbo tax   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. 2009 turbo tax See Are Distributions Taxable , later, for more information. 2009 turbo tax    Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American opportunity credit or the lifetime learning credit. 2009 turbo tax See Coordination With American Opportunity and Lifetime Learning Credits, later. 2009 turbo tax What Is a Qualified Tuition Program A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. 2009 turbo tax QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. 2009 turbo tax The program must meet certain requirements. 2009 turbo tax Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. 2009 turbo tax Qualified education expenses. 2009 turbo tax   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). 2009 turbo tax As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. 2009 turbo tax See Half-time student , later. 2009 turbo tax The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. 2009 turbo tax Tuition and fees. 2009 turbo tax Books, supplies, and equipment. 2009 turbo tax Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution. 2009 turbo tax Expenses for room and board must be incurred by students who are enrolled at least half-time. 2009 turbo tax The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. 2009 turbo tax The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. 2009 turbo tax The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 2009 turbo tax You will need to contact the eligible educational institution for qualified room and board costs. 2009 turbo tax    For tax years after 2010, the purchase of computer technology or equipment is only a qualified education expense if the computer technology or equipment is required for enrollment or attendance at an eligible institution. 2009 turbo tax Designated beneficiary. 2009 turbo tax   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. 2009 turbo tax The designated beneficiary can be changed after participation in the QTP begins. 2009 turbo tax If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship. 2009 turbo tax Half-time student. 2009 turbo tax   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. 2009 turbo tax Eligible educational institution. 2009 turbo tax   For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 2009 turbo tax S. 2009 turbo tax Department of Education. 2009 turbo tax It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2009 turbo tax The educational institution should be able to tell you if it is an eligible educational institution. 2009 turbo tax   Certain educational institutions located outside the United States also participate in the U. 2009 turbo tax S. 2009 turbo tax Department of Education's Federal Student Aid (FSA) programs. 2009 turbo tax   How Much Can You Contribute Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary. 2009 turbo tax There are no income restrictions on the individual contributors. 2009 turbo tax You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. 2009 turbo tax   Are Distributions Taxable The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. 2009 turbo tax This is a return of the investment in the plan. 2009 turbo tax The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution , later). 2009 turbo tax Earnings and return of investment. 2009 turbo tax    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. 2009 turbo tax The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment (box 3). 2009 turbo tax Form 1099-Q should be sent to you by January 31, 2014. 2009 turbo tax Figuring the Taxable Portion of a Distribution To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses. 2009 turbo tax Adjusted qualified education expenses. 2009 turbo tax   This amount is the total qualified education expenses reduced by any tax-free educational assistance. 2009 turbo tax Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2009 turbo tax Taxable earnings. 2009 turbo tax   Use the following steps to figure the taxable part. 2009 turbo tax Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. 2009 turbo tax The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. 2009 turbo tax Subtract the amount figured in (1) from the total distributed earnings. 2009 turbo tax The result is the amount the beneficiary must include in income. 2009 turbo tax Report it on Form 1040 or Form 1040NR, line 21. 2009 turbo tax Example 1. 2009 turbo tax In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. 2009 turbo tax Over the years they contributed $18,000 to the account. 2009 turbo tax The total balance in the account was $27,000 on the date the distribution was made. 2009 turbo tax In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. 2009 turbo tax She paid her college expenses from the following sources. 2009 turbo tax   Gift from parents $1,600     Partial tuition scholarship (tax-free) 3,100     QTP distribution 5,300           Before Sara can determine the taxable part of her QTP distribution, she must reduce her total qualified education expenses by any tax-free educational assistance. 2009 turbo tax   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Equals: Adjusted qualified  education expenses (AQEE) $5,200   Since the remaining expenses ($5,200) are less than the QTP distribution, part of the earnings will be taxable. 2009 turbo tax Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. 2009 turbo tax Sara figures the taxable part of the distributed earnings as follows. 2009 turbo tax   1. 2009 turbo tax $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. 2009 turbo tax $950 (earnings)−$932 (tax-free earnings)     =$18 (taxable earnings)  Sara must include $18 in income (Form 1040, line 21) as distributed QTP earnings not used for adjusted qualified education expenses. 2009 turbo tax Coordination With American Opportunity and Lifetime Learning Credits An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. 2009 turbo tax This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit. 2009 turbo tax Example 2. 2009 turbo tax Assume the same facts as in Example 1 , except that Sara's parents claimed an American opportunity credit of $2,500 (based on $4,000 expenses). 2009 turbo tax   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Minus: Expenses taken into account  in figuring American opportunity credit −4,000     Equals: Adjusted qualified  education expenses (AQEE) $1,200           The taxable part of the distribution is figured as follows. 2009 turbo tax   1. 2009 turbo tax $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. 2009 turbo tax $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). 2009 turbo tax This represents distributed earnings not used for adjusted qualified education expenses. 2009 turbo tax Coordination With Coverdell ESA Distributions If a designated beneficiary receives distributions from both a QTP and a Coverdell ESA in the same year, and the total of these distributions is more than the beneficiary's adjusted qualified higher education expenses, the expenses must be allocated between the distributions. 2009 turbo tax For purposes of this allocation, disregard any qualified elementary and secondary education expenses. 2009 turbo tax Example 3. 2009 turbo tax Assume the same facts as in Example 2 , except that instead of receiving a $5,300 distribution from her QTP, Sara received $4,600 from that account and $700 from her Coverdell ESA. 2009 turbo tax In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. 2009 turbo tax   $1,200 AQHEE × $700 ESA distribution  $5,300 total distribution = $158 AQHEE (ESA)     $1,200 AQHEE × $4,600 QTP distribution  $5,300 total distribution = $1,042 AQHEE (QTP)   Sara then figures the taxable portion of her Coverdell ESA distribution based on qualified higher education expenses of $158, and the taxable portion of her QTP distribution based on the other $1,042. 2009 turbo tax Note. 2009 turbo tax If you are required to allocate your expenses between Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary education expenses, see the examples in chapter 7, Coverdell Education Savings Account under Coordination With Qualified Tuition Program (QTP) Distributions . 2009 turbo tax Coordination With Tuition and Fees Deduction. 2009 turbo tax   A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. 2009 turbo tax Losses on QTP Investments If you have a loss on your investment in a QTP account, you may be able to take the loss on your income tax return. 2009 turbo tax You can take the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. 2009 turbo tax Your basis is the total amount of contributions to that QTP account. 2009 turbo tax You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. 2009 turbo tax If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. 2009 turbo tax ) from all such accounts in order to determine your taxable earnings for the year. 2009 turbo tax By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. 2009 turbo tax Example 1. 2009 turbo tax In 2013, Taylor received a final distribution of $1,000 from QTP #1. 2009 turbo tax His unrecovered basis in that account before the distribution was $3,000. 2009 turbo tax If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). 2009 turbo tax Example 2. 2009 turbo tax Assume the same facts as in Example 1 , except that Taylor also had a distribution of $9,000 from QTP #2, giving him total distributions for 2013 of $10,000. 2009 turbo tax His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). 2009 turbo tax Taylor's adjusted qualified education expenses for 2013 totaled $6,000. 2009 turbo tax In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. 2009 turbo tax   1. 2009 turbo tax $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. 2009 turbo tax $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. 2009 turbo tax $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. 2009 turbo tax Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). 2009 turbo tax Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. 2009 turbo tax Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. 2009 turbo tax Exceptions. 2009 turbo tax   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. 2009 turbo tax Made because the designated beneficiary is disabled. 2009 turbo tax A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. 2009 turbo tax A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. 2009 turbo tax Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2009 turbo tax Made on account of the attendance of the designated beneficiary at a U. 2009 turbo tax S. 2009 turbo tax military academy (such as the USNA at Annapolis). 2009 turbo tax This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. 2009 turbo tax S. 2009 turbo tax Code) attributable to such attendance. 2009 turbo tax Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier. 2009 turbo tax ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. 2009 turbo tax Figuring the additional tax. 2009 turbo tax    Use Part II of Form 5329, to figure any additional tax. 2009 turbo tax Report the amount on Form 1040, line 58, or Form 1040NR, line 56. 2009 turbo tax Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. 2009 turbo tax In addition, the designated beneficiary can be changed without transferring accounts. 2009 turbo tax Rollovers Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). 2009 turbo tax An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. 2009 turbo tax Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. 2009 turbo tax These are not taxable distributions. 2009 turbo tax Members of the beneficiary's family. 2009 turbo tax   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. 2009 turbo tax Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. 2009 turbo tax Brother, sister, stepbrother, or stepsister. 2009 turbo tax Father or mother or ancestor of either. 2009 turbo tax Stepfather or stepmother. 2009 turbo tax Son or daughter of a brother or sister. 2009 turbo tax Brother or sister of father or mother. 2009 turbo tax Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. 2009 turbo tax The spouse of any individual listed above. 2009 turbo tax First cousin. 2009 turbo tax Example. 2009 turbo tax When Aaron graduated from college last year he had $5,000 left in his QTP. 2009 turbo tax He wanted to give this money to his younger brother, who was in junior high school. 2009 turbo tax In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his brother's QTP within 60 days of the distribution. 2009 turbo tax If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. 2009 turbo tax Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. 2009 turbo tax See Members of the beneficiary's family , earlier. 2009 turbo tax Example. 2009 turbo tax Assume the same situation as in the last example. 2009 turbo tax Instead of closing his QTP and paying the distribution into his brother's QTP, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his brother. 2009 turbo tax Prev  Up  Next   Home   More Online Publications