Question

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

Answer 1

Answer:

Option (b) is correct.

Explanation:

Given that,

Interest on Madison County school bonds = $600

Interest on U.S. government bonds = $700

Interest on a Federal income tax refund = $200

Gain on the sale of Madison County school bonds = $500

Gross income:

= 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

Note: Interest on Madison County school bonds is exempt from the calculations of gross income.