Texas Trust receives $10,000 interest on U.S. Treasury bonds and $15,000 interest on State of New York bonds. All $25,000 is distributed to the trust beneficiary, Gary. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Gary has received $10,000 of taxable interest income from U.S. Treasury bonds and $15,000 of tax-free interest income from State of New York bonds. The taxability of the interest income depends on the issuer of the bonds. The interest income from U.S. Treasury bonds is taxable at the federal level but exempt at the state level, while interest income from State of New York bonds is exempt from federal taxes but taxable at the state level. Therefore, Gary has both taxable and tax-free interest income.

Texas Trust Receives $10,000 Interest on U