Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 14, Problem 18CE
a.
To determine
Identify the amount of interest income or interest expense that would be reported by Person K for the year 2019 under the
b.
To determine
Identify Person K’s adjusted basis for the bonds on January 1, 2020.
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Exercise 13-28 (LO. 1)
On July 1, 2019, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature in five years, and the
annual interest rate is 3%.
If an amount is zero, enter "0". Determine any allocation based on months (not days).
a. How much interest income and/or interest expense must Katrina report in 2019, assuming that straight-line amortization is
appropriate?
The interest income Katrina must include in gross income in 2019 is $
The interest expense Katrina may deduct in 2019 is $
b. What is Katrina's adjusted basis for the bonds on January 1, 2020?
Katrina's adjusted basis for the bonds on January 1, 2020, is $
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On December 31, 2021, Danny purchased $23,000 of newly issued bonds of Howard Corporation for $19,045. The bonds are dated
December 31, 2021. The bonds are 9%, 10-year bonds paying interest semiannually on June 30 and December 31. The bonds are
priced to yield 12% compounded semiannually.
Read the requirement.
Requirement a. What is the amount of the original issue discount?
Start by completing the bond amortization table for the first year. (Round all amounts to the nearest dollar.)
Year
Interest Received
December 31, 2021
June 30, 2022
December 31, 2022
Amortization of Original
Issue Discount
Taxpayers Basis
Interest Income for the Bond
The amount of the original issue discount is
Requirement b. For the first semiannual period, what is the amount of the original issue discount Danny must recognize as
ordinary income? (Round the amount to the nearest dollar.)
The amount of the original issue discount Danny must recognize as ordinary income for the first semiannual period is…
In 2019, Mrs. Ulm paid $80,000 for a corporate bond with a $100,000 stated redemption value. Based on the bond's yield to maturity,
amortization of the $20,000 discount was $1,512 in 2019, $1,480 in 2020, and $295 in 2021. Mrs. Ulm sold the bond for $84,180 in
March 2021. Assume the taxable year is 2021.
Required:
a. What are her tax consequences in each year assuming that she bought the newly issued bond from the corporation?
b. What are her tax consequences in each year assuming that she bought the bond in the public market through her broker?
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required A Required B
What are her tax consequences in each year assuming that she bought the bond in the public market through her broker?
2020 Ordinary Income
Amount
$
0
2021 Ordinary Income
$
893
2021 Long-term capital gain
$
893
2019 Ordinary Income
$
0
Chapter 14 Solutions
Individual Income Taxes
Ch. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - LO.1 Taylor is negotiating to buy some land. Under...Ch. 14 - Prob. 6DQCh. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQ
Ch. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - LO.4 Marilyn owns land that she acquired three...Ch. 14 - Prob. 15DQCh. 14 - Prob. 16CECh. 14 - Prob. 17CECh. 14 - Prob. 18CECh. 14 - Prob. 19CECh. 14 - Prob. 20CECh. 14 - Heather owns 400 shares of Diego Corporation...Ch. 14 - Prob. 22CECh. 14 - Prob. 23CECh. 14 - Prob. 24CECh. 14 - Prob. 25CECh. 14 - Prob. 26CECh. 14 - Prob. 27CECh. 14 - LO.1 Anne sold her home for 290,000 in 2019....Ch. 14 - Prob. 29PCh. 14 - Prob. 30PCh. 14 - Nissa owns a building (adjusted basis of 600,000...Ch. 14 - Prob. 32PCh. 14 - Prob. 33PCh. 14 - Prob. 34PCh. 14 - Prob. 35PCh. 14 - Yancys personal residence is condemned as part of...Ch. 14 - Prob. 37PCh. 14 - Prob. 38PCh. 14 - Kevin purchases 1,000 shares of Bluebird...Ch. 14 - Prob. 40PCh. 14 - Prob. 41PCh. 14 - Prob. 42PCh. 14 - Nicky receives a car from Sam as a gift. Sam paid...Ch. 14 - Prob. 44PCh. 14 - Prob. 45PCh. 14 - Prob. 46PCh. 14 - Prob. 47PCh. 14 - Prob. 48PCh. 14 - Helene and Pauline are twin sisters who live in...Ch. 14 - Prob. 50PCh. 14 - Prob. 51PCh. 14 - Prob. 52PCh. 14 - Prob. 53PCh. 14 - Prob. 54PCh. 14 - Prob. 55PCh. 14 - Prob. 56PCh. 14 - Alton Newman, age 67, is married and files a joint...Ch. 14 - John Benson, age 40, is single. His Social...Ch. 14 - Prob. 1RPCh. 14 - Prob. 2RPCh. 14 - Prob. 5RPCh. 14 - Prob. 1CPACh. 14 - Prob. 2CPACh. 14 - Prob. 3CPACh. 14 - Prob. 4CPACh. 14 - Prob. 5CPACh. 14 - Prob. 6CPACh. 14 - Prob. 7CPACh. 14 - Prob. 8CPACh. 14 - Prob. 9CPA
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