On January 5,2013,Tim purchased a bond paying interest at 6% for $30,000.On March 31,2013,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 2013:

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Jane reports $1,350 of interest income in 2013, and Tim reports $450 of interest income in 2013.Tim is a cash basis taxpayer, so he must include the interest in his gross income for the year in which he receives it. Jane is also a cash basis taxpayer, so she must include the interest in her gross income for the year in which she receives it. In this case, Jane received the interest in December 2013, so she must report it on her 2013 tax return. Tim received the interest in January 2013, so he must report it on his 2013 tax return.

On January 5,2013,Tim Purchased a Bond Paying Interest at 6