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Exam CRCM topic 1 question 325 discussion

Actual exam question from ABA's CRCM
Question #: 325
Topic #: 1
[All CRCM Questions]

A bank has given a customer a merchandise gift with a fair market value of $25.00 for opening a deposit account. Which of the following statements describes the proper reporting status of this gift?

  • A. If the cost of the gift is under $20.00, it is not reportable to the IRS.
  • B. The cost of the gift is credited to the customer's account as a bonus, increasing the account balance.
  • C. The fair market value of the gift is reported to the customer on the periodic statement.
  • D. The fair market value of the gift is added to the interest paid and reported on Form 1099-INT.
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Suggested Answer: D 🗳️
by Cam22 at March 19, 2024, 2:50 a.m.

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Cam22
1 month, 2 weeks ago
Selected Answer: D
When a bank gives a customer a gift for opening a deposit account, the fair market value (FMV) of the gift is considered interest and must be reported as such if it meets certain criteria. According to IRS guidelines, if the combined value of all gifts given to a customer during the year is $10 or more (which includes this $25.00 merchandise gift), the value must be reported as interest income. This is reported on Form 1099-INT along with any other interest the customer earns on their deposit account within the tax year.
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