Jason owns Blue Corporation bonds (face value of $10,000), purchased on January 1, 2019, for $11,000.The bonds have an annual interest rate of 3% and a maturity date of December 31, 2028.If Jason elects to amortize the bond premium, what are his taxable interest income for 2019 and the adjusted basis for the bonds at the end of 2019 (assuming straight-line amortization is appropriate)?
A)$300 and $11,000
B)$300 and $10,900
C)$200 and $11,000
D)$200 and $10,900

Question

Quizplus · Accepted Answer

The taxable interest income for 2019 is $200, calculated by subtracting the annual amortization of the premium ($100) from the annual interest received ($300). The adjusted basis for the bonds at the end of 2019 is $10,900, reflecting the original cost of $11,000 minus one year of premium amortization ($100).

Jason Owns Blue Corporation Bonds (Face Value of $10,000), Purchased