Question

26. During recent years, Kanye and Kim, who file a joint return, have been purchasing Series EE bonds in their name to use for the higher education of their son, North, who is currently age 18. During the current year, they redeem $10,000 of the bonds to use for North's freshman year expenses. Of the $10,000 redeemed, $4,000 represents interest. They use $7,000 for tuition and fees, while the other $3,000 is used for room and board. Assuming that their adjusted gross income is $132,550 in 2020, how much of the $10,000 withdrawal do Kanye and Kim have to nclude in 2020 taxable income? a) $1,960 b) $4,000 c) $2,040 d) $3,000 el $1.200

Answer 1

Answer: $3,000

Reason: $ 3,000 out of $10,000 have to include in 2020 taxable income because $3,000 is used for The Son's others expenses like Room & Board. These expenses are paid for their personal use & not for education purpose.

Therefore these are not included in the Taxable income of Kanye and Kim.