LO.6 In 2014, Joyce receives a $4,000 distribution from her Coverdell Education Savings Account, which has a fair market value of $10,000. Total contributions to her CESA have been $7,000. Joyce’s AGI is $25,000.

a. Joyce uses the entire $4,000 to pay for qualified education expenses. What amount should she include in her gross income?

b. Assume instead that Joyce uses only $2,500 of the $4,000 distribution for qualified education expenses. What amount should she include in her gross income?