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Author: BookmFool Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121189  
Subject: Re: gift to 18 yr. old Date: 6/6/2000 11:40 PM
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...The money is coming from cashed out Series EE savings bonds. How may I avoid / defer taxes on the interest received from the cashed out bonds?

Hi, ineptFool. Depending on what you want this money used for, I can think of one option. Have you ever heard of the IRC 529 qualified State tuition plans? If you want to have your daughter use this money for a college education, you can redeem those Series EE savings bonds tax-free, open a 529 plan for her (some states allow up to $10,000/year contribution) and put the contribution in the plan. The interest will be taxable to the student when withdrawn for college at their usually lower tax rate. Most state plans require you to wait 1 year from the date the account was opened before you can begin receiving distributions. See IRS Publication 970 for more details.

Of course, if you didn't intend for this money to be used for college, you may end up paying the tax on the interest upon cashing them, and at your tax rate. Just a suggestion. If you're interested in learning more, try this site:

http://www.savingforcollege.com

HTH

BmF
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