On July 1, 2014, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature

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On July 1, 2014, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature in five years, and the annual interest rate is 6%. The market rate of interest is 2%.
a. How much interest income and/or interest expense must Katrina report in 2014?
b. What is Katrina's adjusted basis for the bonds on January 1, 2015?
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South Western Federal Taxation 2015

ISBN: 9781305310810

38th Edition

Authors: William H. Hoffman, William A. Raabe, David M. Maloney, James C. Young

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