Harry receives a $10,000 distribution from a CESA.On this date,his total account balance is $16,000,with $4,000 representing earnings.If his qualified higher education expenses are $8,000,the amount included in gross income is:
A) None.
B) $500.
C) $2,000.
D) $2,500.
E) None of the above.

Question

Quizplus · Accepted Answer

The taxable portion of the distribution is calculated by multiplying the earnings portion by the ratio of non-qualified expenses to the total distribution: $4,000 * ($2,000/$10,000) = $800. However, since the question asks for the amount included in gross income, which is the taxable portion, the correct answer is $500.

Harry Receives a $10,000 Distribution from a CESA