Malik paid a premium for a corporate bond when he purchased it for $26,208 on the secondary
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Question:
Malik paid a premium for a corporate bond when he purchased it for $26,208 on the secondary market. The bond, which matures in ten years, has a par value of $25,000. If Malik does not elect to amortize the cost of the premium each year, how does he report the premium on his tax return?
a. For each year that he owns the bond, he reports a $120.80 adjustment to interest
b. He will report $1,208 in taxable interest for the year upon maturity
c. He will have a $1,208 capital gain upon maturity
d. He will have a $1,208 capital loss upon maturity
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