Samantha and her son,Brent,are cash basis taxpayers.Samantha gave Brent a corporate bond with a face amount and fair market value of $10,000.On the date of the gift,March 31,2016,the accrued interest on the bond was $100.On December 31,2016,Brent collected $400 interest on the bond.Brent must include in gross income the $300 interest earned after the date of the gift.

Question

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As a cash basis taxpayer, Brent must include in gross income any income earned after the date of the gift. Since he collected $400 in interest on December 31, 2016, and $100 of that interest had already accrued on the gift date, he must include the $300 in interest earned after the gift date in his gross income.

Samantha and Her Son,Brent,are Cash Basis Taxpayers