Pauls Paint -N-Plumbing, Inc. (3P) has been in business for 33 years. Penelope is retiring and passing the business on to her two children in equal shares to manage and operate according to their skills and experience. The children, Derek and Morgan, decide to adopt a retirement plan for both current and future employees in an attempt to attract and retain talent. They have decided to adopt a SIMPLE IRA, funded by both employee and employer contributions.

QUESTION: Gideon has been with 3P for a year and a half. He has deferred some of his compensation and has received a company match in the SIMPLE. Gideons daughter is about to attend college, however, he has not saved any money for her education. What are the tax implications if Gideon takes a distribution from his SIMPLE IRA with 3P to pay for her college education expenses?