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.

Answer 1

Wilma must include the $1,150 of interest in her income this year.

Step-by-step explanation:

Data provided in the question

Certificate of deposit = $57,500

Interest on this certificate = $1,150

By considering the above information, we concluded that the interest income should be taxed as this amount is credited because it is an interest income plus it also included in her income for this year

Hence, the correct option is a.