Tom, a cash basis taxpayer, purchased a bond on March 31 for $10,000, plus $100 accrued interest.In December, he collected $500 interest from the bond.Tom's interest income from the bond for the year is $500.

Question

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Tom's interest income for the year would be $600 because it includes the $500 interest collected in December plus the $100 accrued interest he paid when he purchased the bond, which is also considered taxable interest income for him.

Tom, a Cash Basis Taxpayer, Purchased a Bond on March