Ken and Lynn paid $5,000 to purchase Series EE bonds in the name of their 11-year-old son. The son has no other income, and they are in the 24% tax bracket. The taxable interest this year will be $400 if an election is made to accrue the interest on an annual basis.
a. Will the child owe any tax on the bond interest?
b. Does the son need to file a tax return?
c. What are the current and future tax consequences of annual gifts to their son?