What is the US tax consequence to Rodrigo

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Question - In 2020, Rodrigo purchased 1,000 bonds issued by Exotic Beverage Inc., a California corporation. Rodrigo does not own any equity interest in Exotic Beverage. In 2021, Exotic Beverage pays a interest of $25 per bond. What is the U.S. tax consequence to Rodrigo on the $25,000 of interest income received from the bonds issued by Exotic Beverage?

a) The $25,000 of interest income is subject to U.S. net income tax

b) The $25,000 of interest income is subject to gross U.S. withholding tax at 30%

c) No U.S. tax because Rodrigo does not own any equity interest in Exotic Beverage

d) No U.S. tax because the interest is not U.S. source

Reference no: EM133094834

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