Mr. Stern, a cash basis taxpayer, was notified by his bank that he earned $1,193 of interest on his savings account in 2013. Mr. Stern has not withdrawn any funds from this account for eight years and did not receive the notification until January 26, 2014. Mr. Stern does not recognize the interest as income in 2013.

Question

Quizplus · Accepted Answer

A cash basis taxpayer recognizes income when it is received or made available, not necessarily when it is withdrawn. The interest was credited to Mr. Stern's account in 2013, making it taxable in that year, regardless of when he was notified.

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