A cash basis taxpayer purchased a certificate of deposit for $1,000 on July 1, 2017 that will pay $1,100 upon its maturity on June 30, 2019.The taxpayer must recognize a portion of the income in 2018.

Question

Quizplus · Accepted Answer

The taxpayer must recognize $50 of interest income in 2018 because the certificate of deposit is a cash basis taxpayer and the interest is not taxable until it is received.

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