Chapter 4, Problem 37P

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:

1. 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%.
2. 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.
3. 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.