Question

In: Accounting

On January 1, Year 1, Taxpayer (“T”) purchased both a bond and stock of Corporation X....

  1. On January 1, Year 1, Taxpayer (“T”) purchased both a bond and stock of Corporation X. The bond was purchased for $10,000, had a face value of $10,000 and paid 10% interest ($1,000) on December 31 of each year. The stock was purchased for $10,000 and paid a dividend of $1,000 on December 31, ex- dividend date December 15. T sold both the X stock and the X bond on July 1, of Year The bond sold for $10,300 and the stock sold for $11,000. What income, gain or loss, including character type (e.g. capital gain, interest, dividend, ordinary) will T recognize as a result of the sales?

__________________________________ BOND

__________________________________ STOCK

Solutions

Expert Solution

Answer:
Income from Bond:
Capital Gain on Bond = Sale value of Bond ( -) Purchase value of Bond
                                              = $10,300 (-) $10,000
                                             = $300
Capital Gain on Bond   =   $300
Income from Stock :
Capital Gain on Stock    = Sale value of Stock ( -) Purchase value of Stock
                                               = $ 11,000 - $ 10,000
                                               = $1,000
Capital Gain on Stock   =   $1,000

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