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.

---

Definitions:

Owned Subsidiary

A company whose majority shares or all are held by another company, making it a controlled entity within a larger corporate structure.

Foreign Subsidiaries

Companies that are owned or controlled by a parent company but are located in a different country.

Current Rate Method

A method of foreign currency translation where all financial statement line items are translated at the current exchange rate in effect at the reporting date.

GAAP

Generally Accepted Accounting Principles, a standardized set of accounting rules, standards, and procedures used in the accounting industry primarily in the United States.