A cash basis taxpayer purchased a certificate of deposit for $1,000 on July 1, 2015 that will pay $1,100 upon its maturity on June 30, 2017 . The taxpayer must recognize a portion of the income in 2016
a. True
b. False
Indicate whether the statement is true or false
True
RATIONALE: The difference between the issue price of $1,000 and the amount due at maturity of $1,100 is "original issue discount" that must be amortized. The amortized amount is added to gross income for each year the certificate is held.
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