[FutureCPAin2014]

Please help, thanks in advance! 🙂

Blake holds several high quality bonds that have a par value of $1,000 and pay a fixed rate of interest twice a year. Need to determine how the discount or premium should be treated and the tax requirements.

1) 10 year bond issued by Charlie Corp. The bond was first sold to the public for $950, but because of a fall in interest rates, Steven purchased the bond in the open market for $970 four years later when $10 of the original issue discount had accrued. Two years later, when an additional $5 of original issue discount had accrued Blake sells he bond for $990.
2) Same as above but Blake purchased the bond for $1020 instead of $980 and it holds to maturity.