4
QuizMultiple Choice

Taxes — Test

Question 4 • Financial Math

Rifky wins $⁢10,000 in a lottery and receives $⁢500 in interest from their savings account. How do taxes apply to the money received?

Answer
A
The 500 dollars in interest and the 10 dollars comma 000 lottery winnings are both tax-exempt.
B
The 500 dollars in interest is tax-exempt, but the 10 dollars comma 000 lottery winnings are taxable.
C
The 500 dollars in interest is taxable, but the 10 dollars comma 000 lottery winnings are tax-exempt.
D
The 500 dollars in interest and the 10 dollars comma 000 lottery winnings are both taxable.

Explanation

Interest earned in a savings account is generally taxable income. Lottery winnings are also generally taxable, so both the $500 interest and the $10,000 prize must be reported as income. Therefore, choice A is correct: both amounts are taxable.

AI-written and checked against the verified answer.

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