Question

QUESTION 41

1. Cash basis individuals must include in income annually the increase in the redemption price of Series E and Series EE U.S. savings bonds that they own.

   True

   False

QUESTION 42

1. Marilyn filed her tax return on April 15. At that time, she owed $900 on a total tax liability of $10,000 and she submitted a check for $900 with her tax return. Which of the following penalties will apply to Marilyn?

   		Failure to file.
   		Underpayment of estimated tax.
   		Failure to pay.
   		None of the penalties apply to this return.

Answer 1

Q41)

False

If an individual owns either series E or series EE bonds and use the cash method of reporting income, may :

• defer reporting the interest until the earlier of the year he cash the bonds or the year in which they finally mature, or
• choose to report the increase in redemption value each year as interest.

Hence, the individual may or may not follow the method of reporting the increase in redemption value of series E or EE U.S savings bonds annually.

Q42)

None of the penalties apply to this return

Please note that for the year 2019, the due date of filing tax returns and payment of tax liability is April 15, which is extended to July 15 due to covid outbreak.

However, in the above case of Marilyn, the tax return was duly submitted on April 15 along with the dues on tax liability. Hence, it implies no penalties.

Should you have any query, please comment.

Good luck!