H and W have one child, S.Several years ago, S's grandparents indicated to H and W that they would like to help pay for their grandson's college education.To this end, the grandparents purchased Series EE savings bonds for their grandson in 2012.In 2012, G enrolled at City University in his hometown.G derives virtually all of his support from his parents.However, his grandparents cashed in some of the bonds and paid for G's tuition, $500.Grandma and grandpa are retired and have income of $40,000 for the year.A portion of the interest on the bonds should be nontaxable.

Question

Quizplus · Accepted Answer

The interest on Series EE savings bonds is only tax-free if the bond owner pays for qualified education expenses for themselves, their spouse, or their dependents. Since the grandparents are not claiming G as a dependent, the interest is taxable.

H and W Have One Child, S