A taxpayer can exclude from income interest received from:
A. a savings account established at a local bank.
B. a credit union.
C. a seller-financed mortgage transaction.
D. municipal bonds issued by the state.
is it D
I agree.
Yes, the correct answer is D. A taxpayer can exclude from income the interest received from municipal bonds issued by the state.
To arrive at this answer, you need to understand the concept of interest income and the taxation rules related to it. In general, interest income is typically taxable and residents of the United States are required to report it on their tax returns. However, there are certain exceptions or exclusions that allow taxpayers to exclude interest income from their taxable income.
One such exclusion applies to interest received from municipal bonds. Municipal bonds are debt securities issued by state and local governments to fund various public projects. The interest income earned from these bonds is often exempt from federal income tax. This means that taxpayers do not need to include this interest income when calculating their taxable income.
Therefore, in the given question, the taxpayer can exclude interest received from municipal bonds issued by the state (option D) from their income.