On February 13, Mr. Dega invested $75,000 in TIPS paying 3.5 percent yearly interest. During the year,

Question:

On February 13, Mr. Dega invested $75,000 in TIPS paying 3.5 percent yearly interest. During the year, Mr. Dega received two cash interest payments totaling $2,742. On December 31, the adjusted principal amount of the TIPS was $76,038.
a. How much interest income from the TIPS does Mr. Dega recognize this year?
b. What is Mr. Dega’s tax basis in his TIPS investment at the beginning of next year?