LO.2 Starting in 2002, Chuck and Luane have been purchasing Series EE bonds in their name to use for...

Question

LO.2 Starting in 2002, Chuck and Luane have been purchasing Series EE bonds in their name to use for the higher education of their daughter Susie, who currently is age 18. During the year, they cash in $12,000 of the bonds to use for freshman year tuition, fees, and room and board. Of this amount, $5,000 represents interest. Of the $12,000, $8,000 is used for tuition and fees, and $4,000 is used for room and board. Chuck and Luane’s AGI, before the educational savings bond exclusion, is $112,000. a. Determine the tax consequences for Chuck and Luane, who will file a joint return, and for Susie. b. Assume that Chuck and Luane purchased the bonds in Susie’s name. Determine the tax consequences for Chuck and Luane and for Susie. c. How would your answer to (a) change if Chuck and Luane file separate returns?

Robert · Accepted Answer

a. The savings bonds qualify as educational savings bonds. The savings bonds were
a. The savings bonds qualify as educational savings bonds. The savings bonds were
issued to Chuck and Luane who were at least 24 years of age (actually older) and
the savings bonds were issued after 1989.
Paying the tuition and fees ($8,000) for Susie, their dependent, qualifies as higher
education expenses. The room and board of $4,000 does not qualify. Since the
redemption amount ($12,

LO.2 Starting in 2002, Chuck and Luane have been purchasing Series EE bonds in their name to use for the higher education of their daughter Susie, who currently is age 18. During the year, they cash...

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