How was the account set up?  Who is the donor, who controls the account, and who is the beneficiary?  Could be three separate individuals.  IRC 529 has certain rules (proposed regs) that are contrary to what you'd expect for gift and estate tax purposes. 

Who was the owner of the funds when they were in the account?  Were they distributed to the beneficiary of the account, or back to the donor?  Would there be a completed gift from the beneficiary back to the donor?

Whose Form 1040 has to pick up the income and penalties, if any?  Who will the sponsor/custodian issue the Form 1099-Q to?

Just some observations.