On January 1, 2016, Kunto, a cash basis taxpayer, pays $46,228 for a 24- month certificate. The

Question:

On January 1, 2016, Kunto, a cash basis taxpayer, pays $46,228 for a 24- month certificate. The certificate is priced to yield 4% (the effective interest rate) with interest compounded annually. No interest is paid until maturity, when Kunto receives $50,000. In your computations:
a. Compute Kunto's gross income from the certificate for 2016.
b. Compute Kunto's gross income from the certificate for 2017.
Round any amounts to the nearest dollar.