Under the Original Issue Discount (OID) Rules as Applied to a Three-Year

question 71

Multiple Choice

Under the original issue discount (OID) rules as applied to a three-year certificate of deposit:

• A)All of the income must be recognized in the year of maturity by a cash basis taxpayer.
• B)The OID will be included in gross income for the year of purchase.
• C)The interest income will be the same each year.
• D)The interest income will be greater in the third year than in the first year.
• E)None of these is correct.

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Definitions:

Welfare Effects

The impact of economic policies or market changes on the well-being of individuals and communities, including factors such as income distribution, employment, and access to goods and services.

Advertising

The act of promoting products, services, or brands through various forms of media to attract consumer interest or awareness.

Product Differentiation

The technique of making a product or service stand out from others in the industry to appeal more to a chosen target market.

Barriers To Entry

Factors that prevent new firms from entering and competing in imperfectly competitive industries.