Duncan Purchased State of Wisconsin General-Purpose Bonds at a Cost

question 138

Multiple Choice

Duncan purchased State of Wisconsin general-purpose bonds at a cost of $3,400 in 2011.He receives $170 interest on the bonds in 2011,2012,and 2013.In 2013,he sells the bonds for $3,800.Duncan excludes the bond interest,but must include a $400 capital gain in his 2013 gross income.Which of the following Concepts,Constructs,and/or Doctrines help in forming the basis for this treatment?
I.Capital Recovery Concept.
II.Legislative Grace Concept.

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Securities Act of 1933

A U.S. federal law aimed at ensuring transparency and fairness in the securities market by requiring companies to disclose relevant financial information.

Investment Company Act of 1940

US federal legislation that regulates the organization of investment companies and the activities they engage in.

NAV (Net Asset Value)

The per-share value of a mutual fund or ETF, calculated by dividing the total value of all the securities in its portfolio, minus liabilities, by the number of shares outstanding.

Significant Premium

A significant premium refers to a large additional amount paid over the usual cost or value, often used in the context of acquisitions where the buyout price is well above the market price of a company's shares.