Mr. Stern, a cash basis taxpayer, was notified by his bank that he earned $1,193 of interest on his savings account in 2012. Mr. Stern has not withdrawn any funds from this account for eight years and did not receive the notification until January 26, 2013. Mr. Stern does not recognize the interest as income in 2012.

Question

Quizplus · Accepted Answer

Mr. Stern is a cash basis taxpayer, which means he recognizes income when he receives it, not when it is earned. The notification from the bank does not change the fact that the interest was earned in 2012, and therefore should be recognized as income in that year.

Mr Stern, a Cash Basis Taxpayer, Was Notified by His