For each tax treatment described, determine the applicable income tax concept(s), and explain how it forms the basis for the treatment:

a. Jackson owned coupon bonds with detachable interest coupons. He detached coupons worth $5,000 and gave them to his son to buy a car. Jackson is taxed on the $5,000 of interest, even though he never actually received the interest.

b. Joan's barn on her ranch was destroyed by a tornado. The barn had an adjusted basis of $24,000. Joan received insurance proceeds of $35,000 and built a new barn costing $40,000. Joan does not have to recognize the gain realized on the barn in the current period.

c. Elvis borrowed $30,000 from University Credit Union to purchase a new X car. He is not taxed on the receipt of the $30,000.

d. Kelley lost the diamond ring she received from her husband, Ian. The ring had a basis of $2,000, and she received $3,000 from her insurance company. Kelley used the money to pay off medical bills. Kelley must recognize a $1,000 gain on the loss of her ring.