In December of this year, Jake and Stockard, a married couple, redeemed qualified Series EE U.S. Savings Bonds. The proceeds were used to help pay for their daughter's college tuition. Jake and Stockard received proceeds of $8,000 representing principal of $5,000 and interest of $3,000. The qualified higher educational expenses they paid this year totaled $6,000. Their AGI is below the threshold
for phase-out of the exclusion. What is the amount of interest income Jake and Stockard can exclude from their income this year?
A) $2,250
B) $2,500
C) $3,000
D) $5,000
A) $2,250
$3,000 × [$6,000 / ($5,000 + $3,000)] = $2,250 exclusion
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