Question

A husband and wife are self-employed and have 3 children, ages 4, 7, and 9. They have a combined income of $300,000. They wish to open Coverdell ESAs for each of their children to pay for qualified education expenses. Which statement is TRUE

Answer 1

Answer:

The correct answer is they are prohibited from opening an account for each child because they earn much.

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Explanation:

Solution

Now,

The answer to the question given as follows:

(a) False: The contribution made to ESAs is not tax-deductible. Also, they are not allowed to contribute to ESAs due to high income.

(b) False: The contribution made to ESAs is not tax-deductible but they are not allowed to contribute to ESAs due to high income.

(c) True: Since they have a combined income of $300,000, therefore they are prohibited to open an account for each child under ESAs.

(d) False: There is no such condition that ESAs accounts cannot be opened by self-employed individuals.