Question

Interest payments received from bonds do not qualify for ______ tax rate.

A) Capital gains.
B) Ordinary income.
C) Dividend.
D) Excise.

Answer 1

Interest from bonds is taxed as ordinary income, not at the capital gains tax rate. Capital gains apply to profits from selling assets at a higher price than purchase.

Step-by-step explanation:

Interest payments received from bonds do not qualify for a capital gains tax rate. Capital gains refer to the profit made from selling an asset, such as stocks or real estate, for a price higher than the initial purchase price. However, when it comes to bonds, the interest payments that a bondholder receives are typically considered ordinary income for tax purposes, which is taxed at the regular income tax rates, and not the typically lower capital gains rates.