MCGRAW-HILL'S TAX.OF INDIV.+...(LL)2020
20th Edition
ISBN: 9781260432374
Author: SPILKER
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 38P
To determine
Determine the amount of interest income from bond to be reported by E for this year and for the bond maturity year, in the absence of any special elections.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
At the beginning of his current tax year, Eric bought a corporate bond with a maturity value of $48,000 from the secondary market for $41,400. The bond has a stated annual interest rate of 6 percent payable on June 30 and December 31, and it matures in five years on December 31.
Absent any special tax elections, how much interest income will Eric report from the bond this year and in the year the bond matures?
Jan purchases taxable bonds with a face value of $250,000 for $265,000. The annual interest paid on the bonds is $10,000. Assume Jan elects to amortize the bond premium. The total premium amortization for the first year is $1,600.
What is Jan’s interest income for the first year?
What is Jan’s interest deduction for the first year?
What is Jan’s adjusted basis for the bonds at the end of the first year?
On July 1, 2020, Katrina purchased tax-exempt bonds (face value of $89,500) for $98,450. The bonds mature in five years, and the annual interest rate is 3%.
a. How much interest income and/or interest expense must Katrina report in 2020?
The interest income Katrina must include in gross income in 2020 is $________
The interest expense Katrina may deduct in 2020 is $_______
b. What is Katrina's adjusted basis for the bonds on January 1, 2021? $_______
Chapter 7 Solutions
MCGRAW-HILL'S TAX.OF INDIV.+...(LL)2020
Ch. 7 - Describe how interest income and dividend income...Ch. 7 - What is the underlying policy rationale for the...Ch. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Why would taxpayers generally prefer the tax...Ch. 7 - In what ways are U.S. savings bonds treated more...Ch. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Compare and contrast the tax treatment of...Ch. 7 - What is the definition of a capital asset? Give...
Ch. 7 - Why does the tax law allow a taxpayer to defer...Ch. 7 - Prob. 12DQCh. 7 - What is the deciding factor in determining whether...Ch. 7 - Prob. 14DQCh. 7 - Prob. 15DQCh. 7 - Prob. 16DQCh. 7 - What happens to capital losses that are not...Ch. 7 - Prob. 18DQCh. 7 - Prob. 19DQCh. 7 - What is a wash sale? What is the purpose of the...Ch. 7 - Prob. 21DQCh. 7 - Describe three basic tax planning strategies...Ch. 7 - Prob. 23DQCh. 7 - Prob. 24DQCh. 7 - Prob. 25DQCh. 7 - What limitations are placed on the deductibility...Ch. 7 - When taxpayers borrow money to buy municipal...Ch. 7 - What types of losses may potentially be...Ch. 7 - Prob. 29DQCh. 7 - Discuss the treatment of suspended passive losses...Ch. 7 - What tests are applied to determine if losses...Ch. 7 - Prob. 32DQCh. 7 - Prob. 33PCh. 7 - Dana intends to invest 30,000 in either a Treasury...Ch. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Matt and Meg Comer are married and file a joint...Ch. 7 - Grayson (single) is in the 24 percent tax rate...Ch. 7 - Prob. 47PCh. 7 - During the current year, Ron and Anne sold the...Ch. 7 - In 2019, Tom and Amanda Jackson (married filing...Ch. 7 - For 2019, Sherri has a short-term loss of 2,500...Ch. 7 - Three years ago, Adrian purchased 100 shares of...Ch. 7 - Prob. 52PCh. 7 - Prob. 53PCh. 7 - Prob. 54PCh. 7 - Prob. 55PCh. 7 - Mickey and Jenny Porter file a joint tax return,...Ch. 7 - Prob. 57PCh. 7 - Prob. 58PCh. 7 - Prob. 59PCh. 7 - Rubio recently invested 20,000 (tax basis) in...Ch. 7 - Prob. 61PCh. 7 - Prob. 62PCh. 7 - Prob. 63CP
Knowledge Booster
Similar questions
- Required information [The following information applies to the questions displayed below.) At the beginning of his current tax year, David invests $12,000 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 15 years. David receives $860-in interest ($430 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 6.6 percent. Note: Round your intermediate calculations to the nearest whole dollar amount. b. How much interest will he report this year if he does not elect to amortize the bond premium? Interest Reportedarrow_forwardMatthew borrows $250,000 to invest in bonds. During the current year, his interest on the loan is $30,000. Matthew’s taxable interest income from the bonds is $10,000. This is Matthew’s only investment income. a. Calculate Matthew’s itemized deduction for investment interest expense for this year. ? _____________ b. Is Matthew entitled to a deduction in future years? Explain ____________arrow_forwardMatthew purchases a three-year, $91,000 bond, paying 5% interest semiannually, for $94,000. (a) What are the total tax effects of this purchase over the next three years if he does not elect to amortize the premium? (Round answer to O decimal places, e.g. 125. If answer is zero, please enter O, do not leave any fields blank.) Interest income in year 1 Interest income in year 2 Interest income in year 3 Gain or (loss) on redemption $ $ $ $arrow_forward
- In January 2018, Conan, a cash basis taxpayer, purchases for $4,000 a Series EE savings bond with a maturity value of $4,800 (a 6% annual yield). At the same time, he also purchases for $5,000 a 3-year bank certificate of deposit with a maturity value of $6,650 (a 10% annual yield). Both securities mature in 2020. Note: To determine CD interest income in 2020, subtract the Beginning Book Value from the Ending Book Value (maturity value). a. Conan must recognize $ of interest income in 2018. b. Conan will recognize $ of interest income in 2020.arrow_forwardMinda, resident citizen, invested in a 6-year bond issued by a local bank. The bond was issued by the bank to more than 20 persons in the public and complied with legal requirements. Minda earned a total of P2,000 interest on the instrument for the current period. How much is the final tax on the interest?arrow_forwardOn January 1, 2021, Kunto, a cash basis taxpayer, pays $138,684 for a 24-month certificate of deposit. The certificate is priced to yield 4% (the effective interest rate) with interest compounded annually. No interest is paid until maturity, when Kunto receives $150,000. Round all calculations to the nearest dollar. a. Compute Kunto's gross income from the certificate for 2021. b. Compute Kunto's gross income from the certificate for 2022.arrow_forward
- JEFF CASHED IN A SERIES E BOND THAT HAD EARNED $840 IN INTEREST. HE HAD ELECTED TO REPORT THE INTEREST YEARLY AND WAS REQUIERED TO INCLUDE ONLY $85 ON HIS 2019 FEDERAL TAX RETURN. WHICH ADJUSTMENT WILL NEED TO BE MADE OF JEFF'S CALIFORNIA SCHEDULE CA (540)? A. ENTER $840 ON PART I, LINE 2, COLUMN C B. ENTER ($840) ON PART I, LINE 2 COLUMN B C. ENTER ($85) ON PART I, LINE 2, COLUMN B D. ENTER $85 ON PART I, LINE 2, COLUMC Barrow_forwardArthur files a single income tax return and his maximum tax-free interest under the education savings bond program is $6,000. How much of the interest is excludible if his modified adjusted gross income exceeds the applicable dollar limit by $5,000 (one-third of the phaseout range)?arrow_forwardSteve has a tentative general business credit of $85,000 for the current year. His net regular tax liability before the general business credit is $95,000, and his tentative minimum tax is $90,000. Compute Steve’s allowable general business credit for the year.arrow_forward
- On July 1, 2020, Maria made a $90,000 interest-free loan to her son, Daniel, who used the money to retire a mortgage on his personal residence and to buy a certificate of deposit. Daniel’s only income for the year is his salary of $35,000 and $1,400 interest income on the certificate of deposit. Assume the relevant Federal interest rate is 8% compounded semiannually. Required: Determine the effect of the loan on Maria’s gross income for 2020.arrow_forwardElizabeth makes the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans. The relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year. Borrower's Net Borrower Amount Investment Income Purpose of Loan Richard $5,000 $800 Gift Woody $8,000 $600 Stock purchase Irene $105,000 $0 Purchase principal residence By how much do each of these loans increase Elizabeth's gross income? If an amount is zero, enter "0". a. Richard is not subject to the imputed interest rules because the $10,000 gift loan exception does apply. Elizabeth's gross income from the loan is $ 0 b. The $10,000 exception does not income producing apply to the loan to Woody because the proceeds were used to purchase assets. Although the $100,000 exception applies to this loan, the amount of imputed interest is 1,000 X.Incorrect is $ 0 ✓. c. None of the exceptions apply gross income from the loan is $ to the loan to…arrow_forwardHarper is considering three alternative investments of $10,000. Assume that the taxpayer is in the 24% marginal tax bracket for ordinary income and 15% for qualifying capital gains in all tax years. The selected investment will be liquidated at the end of five years. The alternatives are: • A taxable corporate bond yielding 5.333% before tax and the interest can be reinvested at 5.333% before tax. • A Series EE bond that will have a maturity value of $12,200 (a 4% before-tax rate of return). • Land that will increase in value. The gain on the land is classified and taxed as a long-term capital gain. The income from the bonds is taxed as ordinary income. How much must the land increase in value to yield a greater after-tax return than either of the bonds? For this analysis, ignore the effect of property taxes on the land. Below are the factors for the compound amount of $1 and compound value of annuity payments at the end of five years: Interest Rate 4% 5% $1 Compounded for Five Years…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT