Ward and June Are in the 28% Tax Bracket

Ward and June are in the 28% tax bracket. Included in their assets is a Dell Corporation bond with a face value of $10,000. The bond pays $1,000 per year in interest. Ward and June gift the bond to their son, Wally age 19) , on January 1, 2014. Wally is in the 10% tax bracket. Wally's taxable income from the receipt of the bond and the bond interest in 2014 is

A) $ -0-
B) $ 1,000
C) $ 1,500
D) $10,000
E) $11,000