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21 November, 12:05

Wilma has a $25,000 certificate of deposit (CD) at the local bank. The interest on this certificate, $1,000, 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?

A. Wilma must include the $1,000 of interest in her income this year.

B. Wilma must include the $1,000 of interest in her income when she cashes the CD.

C. Wilma must include the $1,000 of interest in her income this year only if the bank waives the early withdrawal penalty.

D. Wilma must include the $1,000 of interest in her income next year if she does not pay the early withdrawal penalty.

E. All of these

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Answers (1)
  1. 21 November, 12:59
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    A. Wilma must include the $1,000 of interest in her income this year.

    Explanation:

    the interest is taxed when is being credited to the account and this is why Wilma must include it in her income for this year.
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