2. On January 1, 2020, Harry, a cash basis taxpayer, purchased a certificate of deposit...
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2. On January 1, 2020, Harry, a cash basis taxpayer, purchased a certificate of deposit for $40,000. The certificate's maturity value in two years (December 31, 2021) is $44,100, vielding 5% before-tax interest. No interest is paid until maturity. Which of the following statements is correct? a) Harry must recognize $4,100 gross income in 2021. b) Harry must recognize $2,000 gross income in 2020.
2. On January 1, 2020, Harry, a cash basis taxpayer, purchased a certificate of deposit for $40,000. The certificate's maturity value in two years (December 31, 2021) is $44,100, vielding 5% before-tax interest. No interest is paid until maturity. Which of the following statements is correct? a) Harry must recognize $4,100 gross income in 2021. b) Harry must recognize $2,000 gross income in 2020.
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