Dan, who is single, redeems Series EE savings bonds receiving $6,000 of principal and 54,000 of interest. Dan's modified adjusted gross income is $60,000. What are the tax consequences if Dan uses the proceeds to pay qualified higher education expenses totaling $10,000?
a. Only a portion of the amount received can be excluded from gross income because of the phaseout rules
b. All $4,000 of accrued interest income can be excluded from income
c. He is taxable on the entire $10,000 received
d. He is taxable on $4,000 of the redemption proceeds