In February 2016, Paul and Jean, a married couple, cashed a qualified Series EE savings bond they bought in November 2005. They received proceeds of $7,132, representing principal of $5,000 and interest of $2,132. In 2016, they helped pay their daughter's college tuition. The qualified education expenses they paid in 2016 totaled $4,000. They are not claiming an education credit for the expenses, and they do not have an education IRA. How much interest income can Paul and Jean exclude?
a. $4,000
b. $1,000
c. $1,196
d. $2,132
Ans: c. $1,196
Business
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