Jack and Katie have five grandchildren, ages 19, 16, 15, 12, and 10. They have established Coverdell Education Savings Accounts (CESA) for each of the grandchildren and would like co contribute the maximum amount allowable co each CESA for the 2018 taxable year. Jack and Kacie's AGI for 2018 is $196,000.
a. How much can Jack and Katie contribute to each grandchild's CESA in 2018?

b. Assume that the 19-year-old granddaughter is a freshman in college and makes a wichdrawal of $7,000 from her CESA during the year 2018. Her college expenses for 2018 were as follows:

Tuition .................................... $1,500
Room and board .................... 2,500
Books and supplies .................. 500

The extra amount withdrawn was used as a down payment on a car that the granddaughter purchased during the year. She needed the car in order co drive to school rather than having to either ride the bus or ride with a friend. What are the tax consequences of the $7,000 distribution to the granddaughter?