At the beginning of 2014,Mary purchased a 3-year certificate of deposit (CD)for $8,760.The maturity value of the certificate was $10,000 and it was to yield 4.5%.She also purchased a Series EE bond for $6,400 with a maturity value in 10 years of $10,000.Mary must recognize $1,240 of income from the certificate of deposit in 2014,and $3,600 from the Series EE bonds in 2023.

Question

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The income from the certificate of deposit must be amortized over the three-year period as original issue discount.The Series EE bonds are also original issue discount instruments,but the law permits the taxpayer to defer the income until maturity.

At the Beginning of 2014,Mary Purchased a 3-Year Certificate of Deposit