Certified Regulatory Compliance Manager (CRCM) — Question 305

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?

Answer options

• 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.

Correct answer: D

Explanation

The correct answer is D because the IRS requires that any gift or bonus provided to a customer, including the fair market value of such gifts, be reported on Form 1099-INT as it constitutes taxable income. Option A is incorrect as the threshold for reporting is not based on a $20.00 limit. Option B incorrectly suggests that the gift affects the account balance directly, and Option C does not meet the IRS reporting requirements.