Lana purchased for $1,410 a $2,000 bond when it was issued two years ago.She amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?
A)Lana has $10 of long-term capital loss.
B)Lana has $190 of long-term capital gain.
C)Lana has no capital gain or loss.
D)Lana has $190 of long-term capital loss.
E)None of these.

Question

Quizplus · Accepted Answer

Lana purchased the bond for $1,410 and sold it for $1,800, resulting in a capital gain of $390. However, she also amortized $200 of the original issue discount, which reduces her cost basis to $1,210. Thus, her taxable capital gain is $590 ($1,800 - $1,210), which is a long-term gain since she held the bond for more than one year.

Lana Purchased for $1,410 a $2,000 Bond When It Was