Sergio Acquires a $100,000 Ternco Corporation Bond (5%, 20- Year

question 311

Multiple Choice

Sergio acquires a $100,000 Ternco Corporation bond (5%, 20- year bond) on January 1, 2018 for $75,000. The bond had been issued on January 1, 2016. If Sergio holds the bond to maturity, at redemption he will recognize

• A) a mix of ordinary income and long- term capital gain.
• B) a long- term capital gain.
• C) $0 gain or loss.
• D) ordinary income.

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Definitions:

Mortgage Loans

Loans secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty.

Corporate Profits

Corporate profits refer to the earnings of corporations after expenses and taxes have been deducted from revenues.

Labor Unions

Organizations formed by workers from related fields that work towards protecting their collective interests in terms of wages, working hours, and working conditions.

Rent

A regular payment made by a tenant to an owner for the use of the owner’s building, land, or other property.