Assume that a company issues bonds in the hypothetical country of Zinland, where the local currency is the zini (Z). There is an original issue discount tax provision in Zinland’s tax code. The company issues a 10-year zero-coupon bond with a par value of Z1,000 and sells it for Z800. An investor who buys the zero-coupon bond at issuance and holds it until maturity most likely:

A. Has to include Z20 in his taxable income every tax year for 10 years and has to declare a capital gain of Z200 at maturity.

B. Has to include Z20 in his taxable income every tax year for 10 years and does not have to declare a capital gain at maturity.

C. Does not have to include anything in his taxable income every tax year for 10 years but has to declare a capital gain of Z200 at maturity.