No tax audit as long as no rules are broken. Schools do accept (and encourage) securities transfers. Choate posts Securities Transfer Instructions on its website and has a Gifts and Securities Coordinator. Securities are meant as a way to donate to the school, but my head would not explode to find that securities are used in legal ways for other purposes as well.
So in my experience there are rare exceptions where the IRS has a known loophole where people can game the system. The ideal that I can have an appreciable asset and get services/product at the price of the appreciable asset and yet not having anyone pay taxes on that amount – does explode my head. The IRS is very good at rooting out financial dealings where they don’t get their cut. But it never hurts to ask. 
Curious I am, I wonder what happens to ChoatieMom’s 529 since ChoatieCadet won’t use it? Perhaps law or medical school after 5 year is up ??
I wish all my deeply depreciated accounts will recover (not possible, they went bust) so I can think of their uses someday 
I think, IIRC, Choatie’s future grandchildren can use it. Or Choatiekid can use it for graduate school.
Most likely the Army will pay for grad school. At least that is what my friends did. In one case, they paid for med school.
Thanks @6teenSearch. That’s a relief. I remember ESA has to be used by 30 or something like that.
Returning to the original discussion, a few years ago, we did not receive phone calls before hand but received the call on the morning of M10.
One was informing that we would be accepted as a Full Pay.
Another school did not have a decision on the portal on M10 but instead wrote to call the office. When I called, I was told an acceptance will be mailed IF we switch to Full Pay. Our EFC was close to the full tuition.
We would have made it work by going rice or beans but DS1 decided 50K is too much for high school and stayed home. Three years later, DS1 thinks 60K is too much for a college, so it looks like we won’t be spending much for his education.
Meanwhile DS2 is Full Pay in a boarding school and asks if he could go to an expensive college as well.
Well, thanks to the Military Family Tax Relief Act, the funds return to us without penalty except for taxes on the gains: “The value of the no-cost education (as determined under the U.S. military code) can be withdrawn penalty-free from a 529 or CESA, although the earnings portion will continue to be taxable.”
We plan to leave the 529 intact until he graduates in case he decides to withdraw and attend a civilian school. If he doesn’t use them, most of the funds will go into our retirement investments, minus a portion that we are giving him to add to his own investments.
Since I’d wondered about that as well, it’s a relief, @ChoatieMom, to know the government doesn’t get your kid AND all your money - you have been such good planners, and penalized for that along the way. Best of luck to ChoatieCadet and your family!
Well so far it is all WL for my DS, aside from that FP or WL call that started my query. Only one left…and then it’s the long wait for the scant possibility of a late entry with substantial FA (which is what our EFC actually indicates we need). We are dismayed we couldn’t do more! Of course, DS is…I can only imagine…It is a long school day punctured by disappointing news. And we included hidden gems. We’re wishing for luck and ‘a good fit’ assessment from that last school’s AO.
I can absolutely attest to this fact.
You can use appreciated securities to pay tuition but the capital gain needs to be declared on your taxes that year - so you don’t get the “savings” (outside of the transaction costs, which are minimal in comparison to the tax).