Bonnie paid $9,500 for corporate bonds that have a par value of $12,000 and a coupon rate of 9 percent, payable annually. Bonnie received her first interest payment after holding the bonds for 12 months and then sold the bonds for $9,800. If Bonnie is in a 35 percent marginal tax bracket for federal income tax purposes, what are the tax consequences of her ownership and sale of the bonds?

Bonnie paid $9,500 for corporate bonds that have a par value of $12,000 and a coupon rate of 9 percent, payable annually. Bonnie received her first interest payment after holding the bonds for 12 months and then sold the bonds for $9,800. If Bonnie is in a 35 percent marginal tax bracket for federal income tax purposes, what are the tax consequences of her ownership and sale of the bonds?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter3: Preparing Your Taxes

Section: Chapter Questions

Problem 3FPE: Calculating taxes on security transactions. If Julia Diaz is single and in the 24 percent tax...

See similar textbooks

Similar questions

Marlene, a cash basis taxpayer, invests in Series EE U.S. government savings bonds and bank certificates of deposit (CDs). Determine the tax consequences of the following on her 2019 gross income: a. On September 30, 2019, she cashed in Series EE bonds for 10,000. She purchased the bonds in 2009 for 7,090. The yield to maturity on the bonds was 3.5%. b. On July 1, 2018, she purchased a CD for 10,000. The CD matures on June 30, 2020, and will pay 10,816, thus yielding a 4% annual return. c. On July 1, 2019, she purchased a CD for 10,000. The maturity date on the CD was June 30, 2020, when Marlene would receive 10,300.
Vandell is a taxpayer in the 25 percent tax bracket. He invests in Otay Mesa Water District Bonds that pay 4.5 percent interest. What interest on a taxable bond would provide the same after-tax return to Vandell? ______%
Determine the taxpayers gross income for tax purposes in each of the following situations: a. Deb, a cash basis taxpayer, traded a corporate bond with accrued interest of 300 for corporate stock with a fair market value of 12,000 at the time of the exchange. Debs cost of the bond was 10,000. The value of the stock had decreased to 11,000 by the end of the year. b. Deb needed 10,000 to make a down payment on her house. She instructed her broker to sell some stock to raise the 10,000. Debs cost of the stock was 3,000. Based on her brokers advice, instead of selling the stock, she borrowed the 10,000 using the stock as collateral for the debt. c. Debs boss gave her two tickets to the Rabid Rabbits rock concert because she met her sales quota. At the time she received the tickets, each ticket had a face price of 200 and was selling on eBay for 300. On the date of the concert, the tickets were selling for 250 each. Deb and her son attended the concert.
If Isabella Rodriguez is single and in the 22 percent tax bracket, calculate the tax associated with each of the following transactions. (Hint: Use the IRS regulations for capital gains in effect in 2018.) Treat each of the following cases as independent of the others. Tax savings should be preceded by a "-" sign. Round the answers to the nearest cent. She sold stock for $3,025 that she purchased for $2,500 3 months earlier. $ She sold bonds for $3,000 that she purchased for $2,500 3 years earlier. $ She sold stock for $3,080 that she purchased for $4,000 20 months earlier. Assume this to be the only Stock in Isabella's portfolio. $
Mary, a taxpayer in the 35 percent marginal tax bracket, borrows $500,000 at 10 percent interest to invest in 7 percent tax-exempt municipal bonds. The annual interest expense on the loan is $50,000. Mary earns $35,000 interest income on the bonds. What is Mary’s interest expense deduction?
Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Incorporated that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume Melinda’s marginal tax rate is 25 percent. How much explicit tax would she have paid on the Surething Incorporated bond? What is her after-tax rate of return on the Surething Incorporated bond?
Mrs. Nunn, who has a 24 percent marginal tax rate on ordinary income, earned $3,670 interest on a debt instrument this year. Required: Compute her federal income tax on this interest assuming that the debt instrument was: Note: For all requirements, round your final answers to the nearest whole dollar amount. Leave no cells blank - be certain to enter "0" wherever required. a. An unsecured note from her son, who borrowed money from his mother to finance the construction of his home. b. A certificate of deposit from a federal bank. c. A 30-year General Electric corporate bond. d. A U.S. Treasury note. e. A City of Memphis municipal bond. a. Federal income tax b. Federal income tax c. Federal income tax d. Federal income tax e. Federal income tax Amount
At the beginning of his current tax year, Eric bought a corporate bond with a maturity value of $48,000 from the secondary market for $41,400. The bond has a stated annual interest rate of 6 percent payable on June 30 and December 31, and it matures in five years on December 31. Absent any special tax elections, how much interest income will Eric report from the bond this year and in the year the bond matures?
MKJ company is 80% owned by David. On January 1 of the current year, MKJ makes a loan of $53,000 to David. The loan carries an interest rate of 4%. The prescribed rate of interest at the time of the loan is 6%. The loan requires that David make annual payments of $21,200, starting in the following taxation year, until the balance is repaid. How much will David recognize in Net Income for Tax purposes related to the loan in the current year? A. 54000 B. 31800 c. 53000 d. 1372
Assume is Elaine is in the 37% marginal income tax bracket and the 20% bracket for long-term capital gains. What is Elaine’s tax liability from these transactions? #1 Elaine transferred Blackacre (held for investment for 3 years) to Bob in exchange for Whiteacre in a section 1031 exchange. At the time of the exchange, Blackacre has a FMV of $105,000 and is subject to a mortgage of $80,000. Whiteacre has a FMV of $95,000 and is subject to a mortgage of $70,000. Elaine’s basis in Blackacre was $100,000 at the time of the transaction and Bob’s basis in Whiteacre was $50,000. Each party assumes the other’s debt. #2 Sold Greenacre (held for investment for 2 years) to Jerry for $180,000 cash + Jerry’s assumption of Elaine’s $120,000 mortgage on Greenacre. Elaine’s basis in Greenacre was $210,000 at the time of the sale. #3 Sale of antique stamp collection (held for 10 years) for $35,000. Elaine’s basis in the stamps was $5,000 at the time of the sale. #4 Sale…
At the beginning of his current tax year, David invests $12.410 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 25 years. David receives $960 in interest ($480 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 7.6 percent. (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? Semiannual Period 1 2 Yearly Total Adjusted Basis of Bond at Beginning of Semiannual Period $ Interest Received 12,410 $ $ Premium Amortization 480 $ 480 960 $ Reported Interest 8 $ 9 17 LA $ 472 472
At the beginning of his current tax year, David invests $11,550 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 10 years. David receives $820 in interest ($410 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 6.2 percent. (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?