Three Years Ago, Mr

question 33

Multiple Choice

Three years ago, Mr. Lewis paid $40,000 for a newly issued corporate bond with a $50,000 stated redemption value. This year, he sold the bond for $43,900. Through date of sale, Mr. Lewis recognized $940 of the original issue discount (OID) as accrued interest income. Compute his gain or loss on sale.

• A) $3,900 long-term capital gain
• B) $3,900 ordinary income
• C) $2,960 ordinary income
• D) $2,960 long-term capital gain

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