Question

An investor in a country with an original issue discount tax provision (e.g. U.S.) purchases a 20-year zero-coupon bond at a deep discount to par value. The investor plans to hold the bond until the maturity date. The investor will most likely report:

Answer 1

Answer:

The investor will most likely to report taxable income from the bond annually until maturity

Explanation:

Original issue discount tax requires that the investor make provision for part of original issue discount in his taxable income every tax year until maturity. The interest is not payable until it accrued and it is calculated as difference between the bond's par value and its original issue price.