Theresa,a cash basis taxpayer,purchased a bond on July 1,2010,for $10,000,plus $400 of accrued interest.The bond paid $800 of interest each December 31.On March 31,2014,she sold the bond for $9,800,which included $200 of accrued interest.

Question

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The cost of the bond was $10,000 and the proceeds from the sale were $9,600 ($9,800 - $200 accrued interest).Therefore,Theresa had a $400 ($9,600 - $10,000)loss from the sale,and $200 of interest income.

Theresa,a Cash Basis Taxpayer,purchased a Bond on July 1,2010,for $10,000,plus