Question 1

Jerry purchased a U.S.Series EE savings bond for $744.The bond has a maturity value in 10 years of $1,000 and yields 3% interest.This is the first Series EE bond that Jerry has ever owned.

Accepted Answer

A)  Jerry can defer the interest income until the bond matures in 10 years.
B)  Jerry must report ($1,000 - $744) /10 = $25.60 interest income each year he owns the bond.
C)  The interest on the bonds is exempt from Federal income tax.
D)  Jerry can report all of the $256 as a capital gain in the year it matures.
E)  None of these.F) B) and E)
G) B) and D)

Question 2

In December 2017, Todd, a cash basis taxpayer, paid $1,200 of fire insurance premiums for the calendar year 2018 on a building he held for rental income.Todd deducted the $1,200 of insurance premiums on his 2017 tax return.He had $150,000 of taxable income that year.On June 30, 2018, he sold the building and, as a result, received a $500 refund on his fire insurance premiums.As a result of the above:

Accepted Answer

A)  Todd should amend his 2017 return and claim $500 less insurance expense.
B)  Todd should include the $500 in 2018 gross income in accordance with the tax benefit rule.
C)  Todd should add the $500 to his sales proceeds from the building.
D)  Todd should include the $500 in 2018 gross income in accordance with the claim of right doctrine.
E)  None of these.F) A) and B)
G) A) and C)

Exam 4: Gross Income

Correct Answer
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Jerry purchased a U.S.Series EE savings bond for $744.The bond has a maturity value in 10 years of $1,000 and yields 3% interest.This is the first Series EE bond that Jerry has ever owned.

Correct Answer
verified

Exam 4: Gross Income

Correct AnswerverifiedShow Answer

Jerry purchased a U.S.Series EE savings bond for $744.The bond has a maturity value in 10 years of $1,000 and yields 3% interest.This is the first Series EE bond that Jerry has ever owned.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified