Statements regarding bond terminologies

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Reference no: EM132003020

1. A taxpayer who is not a dealer sells a peice of equipment for $18,000, The sales price is payable in 3 annual installments. The taxpayer's basis in the property at the time of the sale was $11,000. Of the $7,000 gain on the sale, $6,000 is subject to depreciation recapture under Code Sec 1245. How much of the gain can be taken into avvoutn under the installment method?

(1) $0 (2) $1,000 (3) $6,000 (4) $7,000

2. Which of the following statements regarding bond terminologies is INCORRECT?

A. A bond that pays no coupons is called a zero-coupon bond.

B. The written, legally binding agreement between the corporate borrower and the lender detailing the terms of a bond issue is called the indenture.

C. A sinking fund is a special account that sets aside periodic payments for bond redemption.

D. An agreement giving the bond issuer the option to repurchase the bond at a specified price prior to maturity is called the preemptive provision.

Reference no: EM132003020

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