Wilma has a $57,500 certificate of deposit (CD) at the local bank. The interest
ID: 2812992 • Letter: W
Question
Wilma has a $57,500 certificate of deposit (CD) at the local bank. The interest on this certificate, $1,150, was credited to her account this year but she must pay an early withdrawal penalty if she cashes in the CD before next year. Which of the following is a true statement?
Multiple Choice
Wilma must include the $1,150 of interest in her income this year.
Wilma must include the $1,150 of interest in her income when she cashes the CD.
Wilma must include the $1,150 of interest in her income this year only if the bank waives the early withdrawal penalty.
Wilma must include the $1,150 of interest in her income next year if she does not pay the early withdrawal penalty.
All of the choices are correct.
Explanation / Answer
Wilma must include the $1,150 of interest in her income this year.
Interest is taxed when credited to the account,hence wilma must include interest income this year