case problem chapter 3 63

8/10/2019 Case Problem Chapter 3 63

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11.11.2014 Memorandum to File 02

Taxation 1

Tel242-356-9090Fax242-356-1010

Thompson Blvd, NassauBahamas N 4912

[email protected]

Lifetime Learning credits, and other similar measures. Married couples living together

must file a joint return to obtain the exclusion

Recommendation Analysis:

The primary advantage of purchasing bonds from Series EE in the names of the

parents is that it may be able to exclude the income interest that finally receive. They

must fit the basic requirements that the funds will be used for educational purposes and

comply with the limitation of income. As the limitation is indexed to inflation and

their future incomes are unknown, parents cannot be decided if they are entitled to the

exception. If bonds are purchased in the names of the children and are under 24 years

of age, the interest may be subject to the "child" tax. However, if the annual interest is

less than $1.900 per child and children choose to report each year there will be fewer

tax even if the children are under age 24 and no tax if the income is less than $950.

The fact that parents expect high-income means that the leverage of the bonds

along the names of the children may be more worthy. This is lawful if the annua

income is not less $1,800 per kid or children are more than 23 years previous.

The fact that children can take in other income in the future means that minors

can face significant future taxes if the bonds are purchased in their names. This is

particularly a problem if the children are under age 24 because they tax parents at all


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11.11.2014 Memorandum to File 03

Taxation 1

Tel242-356-9090Fax242-356-1010

Thompson Blvd, NassauBahamas N 4912

[email protected]

income interest. If it is the case of the children probably would benefit from waiting to

report the interest when the bonds are redeemed.

case problem chapter 3 63

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