Question

During the current year, Sam received interest income from the following investments: $400 from State of Wyoming bonds, $200 from Ford Motor Co., $50 from City of Laramie bonds, $100 from U.S. Treasury bonds. How much of the interest received will be included in gross income

Answer 1

Answer:

$300

Explanation:

We know that The State of Wyoming and City of Laramie bonds are not taxable, so we just caculate the interest income that are taxible into the gross income:

$200 from Ford Motor Co. + $100 from U.S. Treasury bonds

= $300

So $300 of the interest received will be included in gross income

Answer 2

Answer:

$300

Explanation:

According to the Internal Revenue Service (IRS), interest on a state or local government obligation may be tax-exempt even if the obligation is not a bond.

Therefore the interest received that will be included in gross income will exclude interest income from the following investments: $400 from State of Wyoming bonds and  $50 from City of Laramie bonds.

$100 from U.S. Treasury bonds are taxable at federal level, hence will be included.

Therefore taxable amount = $100 from treasury bonds and $200 from Ford Motor Co.