Jerry purchased a U.S. Series EE savings bond for $744. The bond has a maturity value in 10 years of $1,000 and yields 3% interest. This is the first Series EE bond that Jerry has ever owned.
a. Jerry can defer the interest income until the bond matures in 10 years.
b. Jerry must report ($1,000 - $744)/10 = $25.60 interest income each year he owns the bond.
c. The interest on the bonds is exempt from Federal income tax.
d. Jerry can report all of the $256 as a capital gain in the year it matures.
e. None of these.
Answer: a Jerry can defer the interest income until the bond matures in 10 years.