Tom, a cash basis taxpayer, purchased a bond on March 31 for $10,000, plus $100 accrued interest. In December, Tom collected $500 interest from the bond. Tom's interest income from the bond for the year is $500.

Question

Quizplus · Accepted Answer

Tom's interest income for the year is $400 because he can deduct the $100 accrued interest he paid when purchasing the bond from the $500 interest he received.

Tom, a Cash Basis Taxpayer, Purchased a Bond on March