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2020, Mr.walt & Mrs.walt redeem Series EE bonds and receive $14,000, consisting of $10,000 of principal...

2020, Mr.walt & Mrs.walt redeem Series EE bonds and receive $14,000, consisting of $10,000 of principal and $4,000 of interest. Net qualifying educational expenses total $9,380. They are married filing jointly and have other AGI of $128,550. How much interest income must be included in the Wilson's income in 2020 because of the redemption of savings bonds? a. $4,000 b. $1,320 c. $1,876 d. $2,124 e. None is correct.
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Answer #1

"An education savings bond program lets qualified taxpayers exempt all or a portion of interest earned upon redemption of eligible savings bonds from their annual gross income. The bonds become tax exempt when their owners use both the principal and interest to pay for higher education at qualified institutions, either attended by themselves, their spouses, or their dependents."

Solution:-   Option a) 4000 is correct.

  • Here what ever the net qualifying expenses is but the interest will be same so interest income will be 4000
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