Wilma has a $57,500 certificate of deposit (CD) at the local bank. The interest

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

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