Jing,who is single,paid educational expenses of $16,000 in 2016.He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000.Jing's has other adjusted gross income of $81,550.With respect to the $3,000 of bond interest,Jing must include in taxable income

Question

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Jing is eligible to exclude the bond interest from taxable income since she paid educational expenses during the year. However, only the amount of bond interest that exceeds the amount of educational expenses paid can be excluded. In this case, the total amount of education expenses paid is $16,000. Therefore, Jing can exclude up to $3,000 - $16,000 = -$13,000 of bond interest. Since the result of this calculation is negative, Jing can exclude the entire $3,000 of bond interest from taxable income, and the answer is C.

Jing,who Is Single,paid Educational Expenses of $16,000 in 2016