Cash basis taxpayers

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On January 5, 2010, Jane purchased a bond paying interest at 6% for $30,000. On September 30, 2010, she gave the bond to Tim. The bond pays $1,800 interest on December 31. Jane and Tim are cash basis taxpayers. When Tim collects the interest in December 2010:

a) Jane must include all of the interest in her gross income.

b) Tim must include all of the interest in his gross income.

c) Jane reports $450 of interest income in 2010, and Tim reports $1,350 of interest income in 2010.

d) Jane reports $1,350 of interest income in 2010, and Tim reports $450 of interest income in 2010.

e) None of the above is correct.

Reference no: EM13146775

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