Assume a cash basis taxpayer purchased a three-year certificate of deposit on January 1 of the...
Assume a cash basis taxpayer purchased a three-year certificate of deposit on January 1 of the current year. Under the original issue discount (OID) rules which of the following is true?
a.All of the income must be recognized in the year of maturity.
b.The interest income will be recognized equally over three years.
c.The OID will be included in gross income for the year of purchase.
d.The interest income will be recognized over three years but will be greater in the third year than in the first year.
Homework Answers
Answer is d The interest income will be recognized over three years but will be greater in the third year than in the first year.
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Assume a cash basis taxpayer purchased a three-year certificate
of deposit on January 1 of the...
Exercise 4-20 (Algorithmic) (LO. 2) On January 1, 2020, Kunto, a cash basis taxpayer, pays $88,758...
Exercise 4-20 (Algorithmic) (LO. 2) On January 1, 2020, Kunto, a cash basis taxpayer, pays $88,758 for a 24-month certificate. The certificate is priced to yield 4% (the effective interest rate) with interest compounded annually. No interest is paid until maturity, when Kunto receives $96,000. In your computations, round any amounts to the nearest dollar. a. Compute Kunto's gross income from the certificate for 2020. 3,550.32 x b. Compute Kunto's gross income from the certificate for 2021. 85,066.32 x Feedback...
On January 1, 2019, Kunto, a cash basis taxpayer, pays $112,796 for a 24-month certificate. The...
On January 1, 2019, Kunto, a cash basis taxpayer, pays $112,796 for a 24-month certificate. The certificate is priced to yield 4% (the effective interest rate) with interest compounded annually. No interest is paid until maturity, when Kunto receives $122,000. In your computations, round any amounts to the nearest dollar. a. Compute Kunto’s gross income from the certificate for 2019. $ b. Compute Kunto’s gross income from the certificate for 2020. $
On January 1, 2019, Kunto, a cash basis taxpayer, pays $64,719 for a 24-month certificate. The...
On January 1, 2019, Kunto, a cash basis taxpayer, pays $64,719 for a 24-month certificate. The certificate is priced to yield 4% (the effective interest rate) with interest compounded annually. No interest is paid until maturity, when Kunto receives $70,000. In your computations, round any amounts to the nearest dollar. a. Compute Kunto’s gross income from the certificate for 2019. $ b. Compute Kunto’s gross income from the certificate for 2020. $
Freddy purchased a certificate of deposit for $20,000 on July 1, 2018. The certificate's maturity value...
Freddy purchased a certificate of deposit for $20,000 on July 1, 2018. The certificate's maturity value in two years (June 30, 2020) is $21,218, yielding 3% before-tax interest. a. Freddy must recognize $1,218 gross income in 2020. b. Freddy must recognize $300 (.03 × $20,000 × .5) gross income in 2018. c. Freddy must recognize $1,218 gross income in 2018. d. Freddy must recognize $600 (.03 × $20,000) gross income in 2020. e. None of these choices are correc
13. Freddy purchased a certificate of deposit for $20.000 on July 1. 2019. The certificate's maturity value in two...
13. Freddy purchased a certificate of deposit for $20.000 on July 1. 2019. The certificate's maturity value in two years (June 30, 2021) is $21,218, yielding 3% before-tax interest. a. Freddy must recognize $1,218 gross income in 2019. b. Freddy must recognize $1,218 gross income in 2021. c. Freddy must recognize $600 (0.03 × $20,000) gross income in 2021. d. Freddy must recognize $300 (0.03 $20,000 x 0.5) gross income in 2019. e. None of these.
12. Freddy purchased a certificate of deposit for $20,000 on July 1, 2019. The certificate's maturity value in two...
12. Freddy purchased a certificate of deposit for $20,000 on July 1, 2019. The certificate's maturity value in two years (June 30, 2021) is $21,218, yielding 3% before-tax interest. a. Freddy must recognize $1,218 gross income in 2019. b. Freddy must recognize $1,218 gross income in 2021. c. Freddy must recognize $600 (0.03 * $20,000) gross income in 2021. d. Freddy must recognize $300 (0.03 * $20,000 * 0.5) gross income in 2019. e. None of these.
Theresa; a calendar year, cash basis taxpayer, had the following transactions during 2019: On March 31,...
Theresa; a calendar year, cash basis taxpayer, had the following transactions during 2019: On March 31, 2019, she sold a corporate bond for $9,800. She purchased the bond on July 1, 2014 for $10,000. The sales price of $9,800 included $200 of accrued interest. On January 1, 2019, she began receiving payments from an annuity contract she purchased for $100,000. Under the terms of the contract, she will receive $500 per month for her life. The IRś table indicated her...
George, an unmarried cash basis taxpayer, received the fallowing amounts this year: Interest on saving accounts  
George, an unmarried cash basis taxpayer, received the fallowing amounts this year: Interest on saving accounts $2,000 Interest on a state tax refund 600 Interest on City of Salem school bonds 350 Interest portion of proceeds of a 5% bank certificateof deposit purchased last year on July 1 and matured on June 30 of this year 250 Dividends on USG common stock 300 What amount should be George report as gross income from dividends and interest this year?
A newly issued bond pays its coupons once a year. Its coupon rate is 5%, its...
A newly issued bond pays its coupons once a year. Its coupon rate is 5%, its maturity is 20 years, and its yield to maturity is 8% a Find the holding period return for a one-year investment period if the bond is selling at a yeld to maturity of 7% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Holding-period return nces b. If you sell the bond after one year...
A newly issued bond pays its coupons once a year. Its coupon rate is 5.2%, its...
A newly issued bond pays its coupons once a year. Its coupon rate is 5.2%, its maturity is 10 years, and its yield to maturity is 8.2%. a. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 7.2% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Holding-period return 15.28 % b. If you sell the bond after one year...
Exercise 4-20 (Algorithmic) (LO. 2) On January 1, 2020, Kunto, a cash basis taxpayer, pays $88,758 for a 24-month certificate. The certificate is priced to yield 4% (the effective interest rate) with interest compounded annually. No interest is paid until maturity, when Kunto receives $96,000. In your computations, round any amounts to the nearest dollar. a. Compute Kunto's gross income from the certificate for 2020. 3,550.32 x b. Compute Kunto's gross income from the certificate for 2021. 85,066.32 x Feedback...
13. Freddy purchased a certificate of deposit for $20.000 on July 1. 2019. The certificate's maturity value in two years (June 30, 2021) is $21,218, yielding 3% before-tax interest. a. Freddy must recognize $1,218 gross income in 2019. b. Freddy must recognize $1,218 gross income in 2021. c. Freddy must recognize $600 (0.03 × $20,000) gross income in 2021. d. Freddy must recognize $300 (0.03 $20,000 x 0.5) gross income in 2019. e. None of these.
12. Freddy purchased a certificate of deposit for $20,000 on July 1, 2019. The certificate's maturity value in two years (June 30, 2021) is $21,218, yielding 3% before-tax interest. a. Freddy must recognize $1,218 gross income in 2019. b. Freddy must recognize $1,218 gross income in 2021. c. Freddy must recognize $600 (0.03 * $20,000) gross income in 2021. d. Freddy must recognize $300 (0.03 * $20,000 * 0.5) gross income in 2019. e. None of these.
Theresa; a calendar year, cash basis taxpayer, had the following transactions during 2019: On March 31, 2019, she sold a corporate bond for $9,800. She purchased the bond on July 1, 2014 for $10,000. The sales price of $9,800 included $200 of accrued interest. On January 1, 2019, she began receiving payments from an annuity contract she purchased for $100,000. Under the terms of the contract, she will receive $500 per month for her life. The IRś table indicated her...
A newly issued bond pays its coupons once a year. Its coupon rate is 5%, its maturity is 20 years, and its yield to maturity is 8% a Find the holding period return for a one-year investment period if the bond is selling at a yeld to maturity of 7% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Holding-period return nces b. If you sell the bond after one year...
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