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Karen owns IBM bonds with a face value of $10,000. She purchased the bonds on January 1, 2020, for $12,000. The maturity date is December
Karen owns IBM bonds with a face value of $10,000. She purchased the bonds on January 1, 2020, for $12,000. The maturity date is December 31, 2029. The annual interest rate is 4%. What is the amount of taxable interest income that Karen should report for 2020, and the adjusted basis for the bonds at the end of 2020, assuming straight-line amortization is appropriate?
a. | $0 and $11,000 | |
b. | $0 and $10,900 | |
c. | $100 and $11,000 | |
d. | $200 and $11,800 | |
e. | None of the above |
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