On January 5, 2012, Tim Purchased a Bond Paying Interest

question 78

Multiple Choice

On January 5, 2012, Tim purchased a bond paying interest at 6% for $30,000. On September 30, 2012, he gave the bond to Jane.The bond pays $1,800 interest on December 31.Tim and Jane are cash basis taxpayers.When Jane collects the interest in December 2012:

• A)Tim must include all of the interest in his gross income.
• B)Jane reports $450 of interest income in 2012, and Tim reports $1,350 of interest income in 2012.
• C)Jane reports $1,350 of interest income in 2012, and Tim reports $450 of interest income in 2012.
• D)Jane must include all of the interest in her gross income.
• E)None of the above is correct.

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Definitions:

Extortion

A criminal offense in which a person obtains money, property, and/or services from another by wrongfully threatening or inflicting harm to his or her person, property, or reputation. Also called blackmail.

Hacker

A person who illegally accesses, or enters, another person’s or company’s computer system to obtain information or steal money.

Responsible Corporate Officer Doctrine

A legal principle that holds company executives personally liable for the illegal actions of their company if they were in a position to prevent the actions.

Personally Liable

The legal responsibility of an individual to settle a debt or obligation from their own assets.