Sheila purchased a $250000, 365 day T Bill with a quoted yield of 4.55%. She sold the TBill 180 days later, when interest rates were 3.85%. Based on the street method, what tax implications will Sheila incur due to the sale of her T Bill? a) Sheila must report interest income of $5244.51 and a capital gain of $ 850.40 b) Sheila's taxable income will increase by $ 3047.46 c) Sheila muat report interest income of $ 6094.91 d) Sheila will have interest income of $5244.51 and an allowable capital loss of $425.20

Sheila purchased a $250000, 365 day T Bill with a quoted yield of 4.55%. She sold the TBill 180 days later, when interest rates were 3.85%. Based on the street method, what tax implications will Sheila incur due to the sale of her T Bill? a) Sheila must report interest income of $5244.51 and a capital gain of $ 850.40 b) Sheila's taxable income will increase by $ 3047.46 c) Sheila muat report interest income of $ 6094.91 d) Sheila will have interest income of $5244.51 and an allowable capital loss of $425.20

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter11: Property Dispositions

Section: Chapter Questions

Problem 70P

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

(please type answer fast with explanation).

Sheila purchased a $250000, 365 day T Bill with a
quoted yield of 4.55%. She sold the TBill 180 days
later, when interest rates were 3.85%. Based on the
street method, what tax implications will Sheila incur
due to the sale of her T Bill? a) Sheila must report
interest income of $5244.51 and a capital gain of $
850.40 b) Sheila's taxable income will increase by $
3047.46 c) Sheila muat report interest income of $
6094.91 d) Sheila will have interest income of $5244.51
and an allowable capital loss of $425.20

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