1. Mary and John, a married couple who file a joint tax return, purchased government bonds a number of years ago. This year, their daughter, Linda, is starting college at XYZ U. Her expenses are:

Tuition $45,000

Fees 1,200

Books 800

Scholarship 7,500

Room and Meal plan 10,000

School supplies 700

To pay for Lindas education they redeemed $49,000 of education expense qualifying bonds for which they paid $25,000. Their modified AGI this year is $125,000. What amount of bond interest, if any, must they include in this years taxable income? (for answering this problem, use the rules and numbers from the textbook).