On July 1, 2020, Jon Laxtor Acquires a Newly Issued

Multiple Choice

On July 1, 2020, Jon Laxtor acquires a newly issued investment contract with a maturity value of $100,000. It matures on June 30, 2025, with interest accruing at 8 percent per annum. Interest is paid for the first one and one-half years on December 31, 2021. The remaining interest will be paid at maturity. With respect to the minimum amount of interest that Jon must recognize for tax purposes, which of the following statements is correct?

A) Jon will have to recognize $4,000 in 2020 and $8,000 in 2021.
B) Jon will have to recognize nil in 2020 and $8,000 in 2021.
C) Jon will have to recognize nil in 2020 and nil in 2021.
D) Jon will have to recognize nil in 2020 and $12,000 in 2021.