A cash basis taxpayer purchased a certificate of deposit for $1,000 on July 1,2013 that will pay $1,100 upon its maturity on June 30,2015.The taxpayer must recognize a portion of the income in 2013.

Question

Quizplus · Accepted Answer

The taxpayer must recognize the interest income earned in 2013, even though it will not be received until 2015. This is because the taxpayer is on a cash basis, which means that income is recognized when it is received.

A Cash Basis Taxpayer Purchased a Certificate of Deposit for $1,000