During 1993 Kay received interest income as follows:

During 1993 Kay received interest income as follows:

On U.S. Treasury certificates $4,000

On refund of 1991 federal income tax 500

The total amount of interest subject to tax in Kay’s 1993 tax return is:
A . $4,500
B. $4,000
C. $500
D. $0

Answer: A

Explanation:

Choice "a" is correct. Interest income from U.S. obligations is generally taxable. Interest income on a federal tax refund is taxable, even though the refund itself is not taxed.

Choice "b" is incorrect. Interest income on a federal tax refund is taxable, even though the refund itself is not taxed.

Choice "c" is incorrect. Interest income from U.S. obligations is generally taxable.

Choice "d" is incorrect. Interest income from U.S. obligations is generally taxable. Interest income on a federal tax refund is taxable, even though the refund itself is not taxed.