CD Redemption Penalty & Capital Gain/Loss

Can anyone tell me the tax treatment for a CD that is redeemed early with a redemption penalty?

If I earned $900 in interest for the year but paid a $1000 fee for early redemption, can I take a $100 Capital Loss on Schedule D?

Do I still have to report the $900 interest on Schedule B?

Thanks for any help you can give!

RobertP,

You received a 1099-INT reporting in box 1, your $900 in interest.

You must put this $900 on Schedule B, Line 1. This is carried to 1040 line 8a, where the total of your interest is shown.

In box 2 of the 1099-INT is the $1,000 early withdrawl penalty.
This is reported on l040 line 30.

Clyde --- Thanks for your reply.

In my example the interest was $900 and the redemption fee was $1,000. That is, I lost $100 overall.

So will Schedule B Line 4 show -100, and also 1040 Line 8a show -100?

Thanks

Robert

RobertP,

I am sorry I misread your post.

And I gave you some bad advice.

Your 1099-INT has the interest you received in box 1, $900, and in box 2 it has the penalty amount, $1,000.
You claim the interest on Schedule B line 1. This is carried to line 8a.

The Early Withdrawl Penalty is an adjustment to income and goes on 1040 line 30, Penalty of Early Withdrawl of Savings.

I am going back to amend my original post....