Kyle and Tess Water are married, file a joint return, and have two dependent children in college, Luke and Taylor. Luke attends a State University in a neighboring state, and Taylor attends a State University in their home state. Neither receives any type of financial assistance. The Water modified AGI in 2017 is $119,000. The children's classifications and expenses are as follows:

Spring Semester

(paid in January 2017) (paid in July 2017)

Luke: Senior Master's candidate

Tuition $7,400 $8,200

Laboratory fees 550 550

Student activity fees 300 300

Course materials (books) 450 500

Room and board 3,000 3,000

Taylor: Sophomore Junior

Tuition $1,550 $1,650

Student activity fees 300 300

Course materials (books) 150 275

Room and board 3,300 3,900

a. Compute any education credits that the Waters may claim in 2017.

(Assume that both Luke and Taylor qualify as eligible students for the American Opportunity Tax Credit.)

b. How would your answer in Part a change if Luke received an academic scholarship of $2,600 (excluded from gross income) for each semester?

c. How would your answer in Part a change if Kyle and Tess's modified AGI for

2017 was $172,000?

d. How would your answer in Part a change if Luke had been a junior during Spring semester and a senior during Fall semester?