Financial Planner

Answer: A - The U.S. Government’s Series E bond was replaced by the EE bond. The original bond was designed to encourage more people to save money. It was sold in denominations of $25 - $10,000 and were sold at a discount and paid no interest. The Treasury issued the new Series EE bond to replace the Series E bond. The rate of interest is a variable that allows investors to benefit from increasing interest rates. Neither of these bonds is taxable until the bonds are redeemed or reach maturity. However, they do permit recognition of the income in earlier years with a valid election. Recognizing the income from the bonds may be a tax planning strategy for young children who have no other taxable income and will thereby create basis in the bonds. Once the Series EE bonds reach maturity, taxes can further be deferred by exchanging them for HH bonds.