On July 1, 2015, Harold paid $10,000 for a ten-year bond with a stated interest

Question

On July 1, 2015, Harold paid $10,000 for a ten-year bond with a stated interest rate of %5, payable annually on July1. On April, 2016, 275 days after purchasing the bond, Harold sold the bond to Sam for $10,050. Which of the following should be reported on Harold's return? A. $0 of interest income and $50 of short-term capital gain B. $125 of interest income and $50 short-term capital gain C. $376 of interest income and $0 capital gain D. $376 of interest income and $50 of short-term capital gain

Explanation / Answer

Bonds purchase on july 1,2015 at $10000 and sale on april, 2016 at $10050 it means bond gives short term capital gain of $ (10050-10000) = $50

and bonds interest income is (10000*5%*275/365) =$376

so answer is D. $376 of interest income and $50 of short-term capital gain

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.