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Ken and Lynn paid to purchase Series EE bonds in the name of their 11-year-old son. The son has no other income, and they are in the % tax bracket. The taxable interest this year will be if an election is made to accrue the interest on an annual basis.

Ken and Lynn paid $5,000 to purchase Series EE bonds in the name of their 11-year-old son. The son has no other income, and they are in the 24% tax bracket. The taxable interest this year will be $400 if an election is made to accrue the interest on an annual basis. Read the requirements a. Will the child owe any tax on the bond? b. Does the son need to file a tax return? A. Yes. The son is required to file a return to report the annual interest earned. B. No, because the total taxable income is less than $10,000 OC. No, because the interest earned on Series EE bonds is nontaxable. D. Yes. The son should file a return and elect to report interest annually. If interest is reported annually there will be little if any tax. It all interest is reported when the bonds mature there will be a large income reported in a single year and a significant tax liability. c. What are the current and future tax consequences of annual gifts to their son? A. Each gift potentially decreases the child's income. Therefore, it may be desirable to elect the annual reporting of Series EE interest. B. Each gift potentially increases the child's income. If a dependent child's uneared income increases above $350, there is a potential tax and the tax on income over $1,100 will be filed by the child on Form 1040. G. Each gift potentially increases the child's incomo. If the child has unearned income, it is not subject to the kiddie tax rules and therefore not included on the Ken and Lynn paid $5,000 to purchase Series EE bonds in the name of their 11-year-old son. The son has no other income, and they are in the 24% tax bracket. The taxable interest this year will be $400 if an election is made to accrue the interest on an annual basis. Read the requirements O A. Yes. The son is required to file a return to report the annual interest earned. B. No, because the total taxable income is less than $10,000. C. No, because the interest eamed on Series EE bonds is nontaxable. D. Yes. The son should file a return and elect to report interest annually. If interest is reported annually there will be little if any tax. If all interest is reported when the bonds mature there will be a large income reported in a single year and a significant tax liability. c. What are the current and future tax consequences of annual gifts to their son? OA. Each gift potentially decreases the child's income. Therefore, it may be desirable to elect the annual reporting of Series EE interest B. Each gift potentially increases the child's income. If a dependent child's unearned Income increases above $350, there is a potential tax and the tax on income over $1,100 will be filed by the child on Form 1040. C. Each gift potentially increases the child's income. If the child has unearned Income, it is not subject to the kiddie tax rules and therefore not included on the parent's return OD. Each gift potentially increases the child's income. If a dependent child's unearned income increases above $1,100, there is a potential tax and the tax on Income over $2,200 will be at higher rates as long as the child is under age 18 (24 in some instances) a

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