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

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.

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