Which of the following statements concerning the tax treatment of interest income is true?
A)Individuals must accrue interest on a daily basis.
B)The anniversary day accrual method of recognizing interest income requires that interest income received by a corporation be recognized for tax purposes for every twelve-month period from the date the investment is made.
C)Foreign interest income is exempt from taxes in Canada.
D)The anniversary day accrual method of recognizing interest income requires that interest income received by an individual be recognized for tax purposes for every twelve-month period from the date the investment is made.

Question

Quizplus · Accepted Answer

The anniversary day accrual method of recognizing interest income requires that interest income received by an individual be recognized for tax purposes for every twelve-month period from the date the investment is made. This means that interest on an investment made on January 1st, for example, would be recognized for tax purposes on January 1st of the following year, regardless of when the interest was actually received. Option A is incorrect, as while individuals may choose to accrue interest on a daily basis, there is no requirement to do so. Option B is incorrect, as there is no such thing as an anniversary day accrual method for corporations. Option C is also incorrect, as foreign interest income is generally subject to Canadian taxes.

Which of the Following Statements Concerning the Tax Treatment of Interest