Starting in 2000, Sergio and Jasmine have been purchasing Series EE bonds in the

Question

Starting in 2000, Sergio and Jasmine have been purchasing Series EE bonds in their name to use for the higher education of their son, Devon, who currently is age 20. In 2015, they cash in $24,000 of the bonds to use for tuition, fees, and room and board. Of this amount, $10,000 represents interest. Of the $24,000, $19,200 is used for tuition and fees, and $4,800 is used for room and board. Sergio and Jasmine's AGI, before the educational savings bond exclusion, is $130,000.

If an amount is zero, enter "0".

a. If Sergio and Jasmine file a joint, how much is the savings bond exclusion?

Note: Round any division to three decimal places and use rounded amount in subsequent computations. if required, round your final answer to the nearest dollar.

b. Assume that Sergio and Jasmine purchased the bonds in Devon's name. Determine the tax consequences for Devon.

Explanation / Answer

a.

Proceeds from reemption of bonds = $24,000

Amount paid for tution fees = $19,200

Amount paid for room and board are not qualified expenses.

Tax exclusion = $10,000 * $19,200/$24,000 = $8,000

However, since the AGI of the couple is $130,000 maximum tax exclusion is $4,000.

b.

No tax exclusion shall be provided to Devon because the savings bonds have to purchased in the name of the parents. Also, Devon was not 24 when the bonds are originally purchased.

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