Question

Andrew invested in a US Savings bond. He paid 500 for the initial investment one year ago. The redemption value of the bond increased by 25 in the current year. What is not acceptable for reporting the income?

1) Reporting the initial investment amount
2) Reporting the increase in redemption value
3) Reporting the total income from the bond
4) Reporting the current year's redemption value

Answer 1

The initial investment amount is not acceptable for reporting the income from a bond investment; instead, one should report the increase in redemption value, total income, and the current year's redemption value.

Step-by-step explanation:

When Andrew invested in a US Savings bond, he made an initial payment of $500, and the redemption value of the bond increased by $25 in the current year. In terms of reporting income from the bond for tax or financial purposes, the not acceptable option is to report the initial investment amount. The appropriate figures to report would include the increase in redemption value, the total income from the bond if any, and the current year's redemption value, because these reflect the actual earnings or increase in value associated with the investment.

The initial investment amount is typically not reported as income because it represents the cost basis, which is the amount paid to purchase the investment, rather than any sort of earnings.