On January 5, 2017, Tim Purchased a Bond Paying Interest

question 106

Multiple Choice

On January 5, 2017, Tim purchased a bond paying interest at 6% for $30,000. On March 31, 2017, 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 2017: ​

• A)Tim must include all of the interest in his gross income.
• B)Jane must report $1,800 gross income for 2017.
• C)Jane reports $1,350 of interest income in 2017, and Tim reports $450 of interest income in 2017.
• D)Jane reports $450 of interest income in 2017, and Tim reports $1,350 of interest income in 2017.
• E)None of these is correct.

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Definitions:

Probability Of Success

The likelihood of achieving a favorable outcome in a binomial setting or experiment.

Constant

A fixed value that does not change.

Binomial Distribution

A probability distribution expressing the probability of a fixed number of successes in a fixed number of trials, with only two possible outcomes.

Mean

The average of a set of numbers, calculated by dividing the sum of the numbers by the count of numbers.