Final answer:
The exclusion of interest on educational savings bonds applies to parents who purchase bonds for which the proceeds are used for their child's education. Option B is correct.
Step-by-step explanation:
The exclusion of interest on educational savings bonds refers to the tax benefit provided to parents who purchase bonds specifically for their child's education. This benefit allows them to exclude the interest earned from these bonds when used for educational expenses from their taxable income. It's a specific incentive for parents investing in their child's education by using these bonds, granting a tax advantage on the interest earned when utilized for educational purposes.
This exclusion doesn't solely pertain to bonds owned by the child or create an obligation for the child to include the interest in their income if the bond is owned by the parent. Additionally, the exclusion applies even if the proceeds are used to cover room and board expenses related to education.
So, the correct answer is that it applies to parents who purchase bonds for their child's education (B).
This question should be provided as:
The exclusion of interest on educational savings bonds:___________
- a. Applies only to savings bonds owned by the child.
- b. Applies to parents who purchase bonds for which the proceeds are used for their child's education.
- c. Means that the child must include the interest in income if the bond is owned by the parent.
- d. Does apply even if used to pay for room and board.
- e. None of these.