Question

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

Answer 1

Answer:

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.