Question

Abner owned bonds that paid $750 of interest on the first day of January each year. Exactly one-third of the way through the current year, Abner gave the bonds to his brother, Brody. When Brody receives the $750 of interest on the first day of January next year, what amount of the $750, if any, will be included in Brody’s gross income next year?

Answer 1

Answer:

The answer is $500

Explanation:

For the current year, Abner owns one-third of the interest income while his brother, Brody own the remaining two-third of the interest income.

The interest Income needs to be prorated.

Brody's two-third of $750 is:

2/3 x $750

=$500

While Abner's one-third of $750 is:

1/3 x$750

=$250.

Therefore, $500 will be included in Brody's gross income next year.