Lana purchased for $1,410 a $2,000 bond when it was issued two years ago. Lana 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 the above.

Question

Quizplus · Accepted Answer

To calculate the gain or loss on the sale of the bond, we need to determine Lana's adjusted basis in the bond.

The original purchase price of the bond was $1,410, and Lana amortized $200 of the original issue discount. So her adjusted basis in the bond is $1,610 ($1,410 + $200).

Lana sold the bond for $1,800, resulting in a long-term capital gain of $190 ($1,800 - $1,610).

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