This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section below.
A couple has just had a baby and they want to start saving for college. What option does NOT offer the opportunity for their investment to grow free of federal taxes?
A: Education Savings Account
B: UGMA/UTMA Account
C: 529 College Savings Plan
D: 529 Prepaid Tuition Plan
ANSWER & RATIONALE
Correct Answer: B
Rationale: Unlike the other options, UGMA/UTMA (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act) accounts are subject to federal income and capital gains taxes.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.