Reference no: EM131817800

Question - Marlene, a cash basis taxpayer, invests in Series EE U.S. Government savings bonds and bank certificates of deposit (CDs). Determine the tax consequences of the following on her 2011 gross income.

a) On July 1, 2011, she purchased a CD for $10,000. The CD matures on June 30, 2013, and will pay $10.816, thus yielding a 4% annual return.

b) On December 31, 2011, she cashed in a CD and received $11,025. She purchased the CD on January 1, 2010 and the yield to maturity was 5%.

c) On September 30, 2011, she cashed in Series EE bonds for $10,000. She purchased the bonds in 2011 for $7,025. The yield to maturity on the bonds was 4.5%.