Marlene, a cash basis taxpayer, invests in Series EE U.S. government savings bonds and bank certificates of deposit (CDs). Determine the tax consequences of the following on her 2019 gross income. If an amount is zero, enter "0".
a. On September 30, 2019, she cashed in Series EE bonds for $10,000. She purchased the bonds in 2009 for $7,090. The yield to maturity on the bonds was 3.5%. The Series EE bonds are not subject to the original issue discount rules.
Her 2019 gross income from the bonds is $_________ ?

First, We now that Series EE bonds (which rare savings bonds from the U.S. Government which have the guarantee to bring at least double its value over 20 years), are not affected by the rules of the Original Issue Discount (OID).

As such, we calculate based on the assumption that Marlene did not add the annual increments in value to income each year.

Therefore,

Marlene's Gross Income from the bonds in 2016

= The cash received - The Price the bond was purchased

= $10,000-$7,090

= $2,910