Karen Owns City of Richmond Bonds with a Face Value

Multiple Choice

Karen owns City of Richmond bonds with a face value of $10,000. She purchased the bonds on January 1, 2014, for $11,000. The maturity date is December 31, 2023. The annual interest rate is 8%. What is the amount of taxable interest income that Karen should report for 2014, and the adjusted basis for the bonds at the end of 2014, assuming straight-line amortization is appropriate?

A) $0 and $11,000.
B) $0 and $10,900.
C) $100 and $11,000.
D)
$100 and $10,900.
E) None of the above.