Nothing bars you from taking a distribution from your IRA and then giving the money to your granddaughter. However, if you’re withdrawing the funds from a traditional IRA (and you never made nondeductible contributions to it), you’re going to be fully taxed on the distribution. However, even if you’re under age 59½, you aren’t subject to a 10% early distribution penalty as long as your granddaughter uses the funds for qualified higher education expenses.
A tax technique for receiving a refund of back taxes by applying a deduction or credit from a current tax year to a prior tax year. For example, a business net operating loss may be carried back for two years.