1A

At the beginning of his current tax year, David invests $12,840 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 20 years. David receives $580 in interest ($290 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 3.8 percent.

Note: Round your intermediate calculations to the nearest whole dollar amount.

a. How much interest income will he report this year if he elects to amortize the bond premium?

At the beginning of his current tax year, David invests $12,840 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 20 years. David receives $580 in interest ($290 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 3.8 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?

1B

Five years ago, Kate purchased a dividend-paying stock for $18,000. For all five years, the stock paid an annual dividend of 5 percent before tax and Kates marginal tax rate was 24 percent. Every year Kate reinvested her after-tax dividends in the same stock. For the first two years of her investment, the dividends qualified for the 15 percent capital gains rate; however, for the last three years the 15 percent dividend rate was repealed and dividends were taxed at ordinary rates.

Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.

a. What is the current value (at the beginning of year 6) of Kate's investment assuming the stock has not appreciated in value?

\begin{tabular}{|c|c|c|c|c|} \hline SemiannualPeriod & AdjustedBasisofBondatBeginningofSemiannualPeriod & InterestReceived & PremiumAmortization & ReportedInterest \\ \hline 1 & & & & \\ \hline 2 & & & & \\ \hline Yearly Total & & $ & $ & $ \\ \hline \end{tabular}