Quentin and Janelle would like to establish a Coverdell Education Savings Account (CESA) for their daughter, age 5, and their nephew (the son of Quentin's brother), age 8. Their AGI is $145,000. Quentin's brother has already contributed $1,500 to a CESA for his son. a. What is the maximum amount Quentin and Janelle can contribute to a CESA for their daughter and their nephew? b. If their AGI were $208,000, what is the maximum amount they can contribute to a CESA for their daughter and their nephew?
What will be an ideal response?
a. Quentin and Janelle can contribute $2,000 to a CESA for their daughter. They can contribute $500 to the CESA for their nephew. The total contribution for an individual beneficiary is $2,000 per year. Since Quentin's brother already contributed $1,500 there is only $500 remaining for Quentin and Janelle to contribute.
b. In this case, the contribution is limited because their AGI is within the phaseout range. In the case of their daughter, their disallowed deduction is:
($208,000 - $190,000)/$30,000 × $2,000 = $1,200.
Thus, the maximum permitted contribution is $800.
In the case of their nephew, they can contribute $500. The limitation in this case is the same as in part a; the total contribution for an individual beneficiary is $2,000 per year. Since Quentin's brother already contributed $1,500, there is only $500 remaining to contribute.
You might also like to view...
According to a BusinessWeek summary of management studies, which of the following is characteristic of men in the workplace, compared with women?
A. Being more collaborative. B. Producing higher quality work. C. Using a more autocratic style. D. Generating more new ideas. E. Being more effective.
Advantage Milling Devices is preparing to buy a new machine for precision milling of special metal alloys. This device can earn $300 per hour, and can run 3,000 hours per year. The machine is expected to be this productive for four years
If the interest rate is 6%, what is the net present value of the annual cash flows? What is the net present value if the interest rate is not 6%, but 9%? Why does present value fall when interest rates rise?
The political and regulatory climate for marketing in a country or region of the world means not only identifying the current environment but also determining how
A. the country's stocks are performing on the stock exchange. B. its citizens budget their money. C. long a favorable or unfavorable climate will last. D. its population ranks in size compared to other countries. E. it conducts its macrofinancing.
Mervin, the vice president of a curtain manufacturing company, emphasizes that the production of curtains should meet the actual current demand. He believes in minimizing the inventories of finished products and work in process at each stage of the supply chain. In this scenario, Mervin follows the _____.
A. push system B. mass production system C. job production system D. just-in-time production system