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James purchases a bond for 50,000. The bond pays 10% interest ($2,500) on both June...

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Accounting

James purchases a bond for 50,000. The bond pays 10% interest ($2,500) on both June 30 and December 31st. James gifts the bond coupon (not the bond) to his nephew on September 30th. How much is taxed to the nephew?

a. zero, because the nephew was gifted the coupon, not the bond.

b. $2,500 because the nephew only held the coupon for three months.

c. $5,000 because that is the amount of cash the nephew actually received.

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