TRAVIS AND VIRGINIA HAS BEEN DOMICILED IN WASHINGTON FOR 25

TRAVIS AND VIRGINIA HAS BEEN DOMICILED IN WASHINGTON FOR 25 YEARS. OF THE LAST 10 HE PURCHASED SEVERAL US SAVINGS BONDS EACH YEAR. ALL ARE IN HIS NAME. CASHED IN 7000 FOR A VACATION. OF THE 7000, 2700 WAS INTEREST, NONE OF WHICH HAS BEEN TAXED BEFORE. WHAT AMOUNT OF INCOME WILL TRAVIS REPORT ON HIS SEPARATE RETURN

3150

2700

7000

9700

Solution

The answer should be option B $2700 As out of $7000 invested by Travis $2700 is interest income that should mean the remaining amount is the basis of ths stock which is $4300. Hence $2700 should be reported on his separate return If any doubt please comment