Mr.Stern,a cash basis taxpayer,was notified by his bank that he earned $1,193 of interest on his savings account in 2017.Mr.Stern has not withdrawn any funds from this account for eight years and did not receive the notification until January 26,2018.Mr.Stern does not recognize the interest as income in 2017.

Question

Quizplus · Accepted Answer

Under the cash basis method, income is recognized when received, not when it is earned. Mr. Stern received the notification of the interest earned on his savings account in 2018, but the interest was earned in 2017. Therefore, Mr. Stern must recognize the interest as income in 2017, even though he did not withdraw any funds from the account.

MrStern,a Cash Basis Taxpayer,was Notified by His Bank That He