Choose the response that correctly completes the following sentence describing the tax treatment and reporting requirements for interest income from U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Interest income from this type of investment is:

Federally taxable and must be reported on Form 1040.

Nontaxable and does not have to be reported on Form 1040.

Not federally taxable but should be reported on Form 1040.

Not federally taxable and is only reportable on Form 1040 when the amount received exceeds $1,500.