In 2016, Ken and Lynn paid $5,000 to purchase Series EE bonds in the name of their 11-year-old son. The son has no other income, and they are in the 28% tax bracket. The taxable interest during the first year will be $400 if an election is made to accrue the interest on an annual basis.
a. Will the child owe any tax on the bond interest?
b. Does the son need to file a tax return?
c. What are the tax consequences in 2016 and subsequent years if annual gifts are made to their son?