Question

Heather's interest and gains on investments for the current year are as follows:Interest on Madison County school bonds $600Interest on U.S. government bonds 700Interest on a Federal income tax refund 200Gain on the sale of Madison County school bonds 500Heather's adjusted gross income from the above is: or;Heather must report gross income in the amount of:a. $2,000.b. $1,800.c. $1,400.d. $1,300.e. None of these

Answer 1

Answer:

c. $1,400

Explanation:

The computation of the amount which is reported in the gross income is shown below:

= Interest on U.S. government bonds + Interest on a Federal income tax refund + Gain on the sale of Madison County school bonds

= $700 + $200 + $500

= $1,400

The Interest on Madison County school bonds $600 is exempt. So, it is not taxable and thus not included in the gross income.