During the Current Year, U Made a $36,000 Contribution to a 529

question 72

Multiple Choice

During the current year, U made a $36,000 contribution to a 529 plan to help cover the cost of an undergraduate degree for D, her 15-year-old daughter.Assume three years later D elects to join the work force when she graduates from high school (rather than attend college) and the entire $45,000 accumulated in the 529 plan is distributed to U.How much is included in U's gross income?

• A)$45,000
• B)$36,000
• C)$9,000
• D)$0

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Definitions:

Saving

The act of setting aside money for future use, reducing current consumption.

Induced Consumption

Consumer spending that increases or decreases as a result of changes in income, as opposed to autonomous consumption that does not change with income.

Disposable Income

Income available to a household or individual after taxes have been paid, available for spending or saving.

Autonomous Consumption

The level of spending on goods and services that occurs even when income is zero, representing non-discretionary, baseline consumption.