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, 2012, the accrued interest on the bond was $100. On December 31, 2012, 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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Brent must include in his gross income the interest earned after the date of the gift, which is $300 ($400 interest collected on December 31, 2012, minus $100 accrued interest on March 31, 2012, the date of the gift). The face amount and fair market value of the bond are not relevant for determining taxable income.

Samantha and Her Son, Brent, Are Cash Basis Taxpayers