Martha Participated in a Qualified Tuition Program for the Benefit

question 93

Multiple Choice

Martha participated in a qualified tuition program for the benefit of her son.She invested $6,000 in the fund.Four years later her son withdrew $8,000, the entire balance in the program, to pay his college tuition.

• A)Martha must include the $2,000 ($8,000 - $6,000) in her gross income when the funds are used to pay the tuition.
• B)Martha must include the portion of the $2,000 accumulated each year in her gross income (i.e., interest).
• C)Martha's son must include the $2,000 ($8,000 - $6,000) in his gross income when the funds are used to pay the tuition.
• D)Neither Martha nor her son must include the $2,000 in gross income.
• E)None of the above.

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Definitions:

Overhead

Indirect costs associated with running a business that are not directly tied to a specific product or service, such as rent and utilities.

Variable Factory Overhead Controllable Variance

The difference between the actual variable overhead costs incurred and the standard variable overhead expenses expected, which can be controlled or influenced by management.

Standard Factory Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a certain base such as labor hours or machine hours.

Direct Labor Hour

A measure of the amount of time an employee spends producing goods or services, directly associated with the product's cost.