For the year ended December 31, 2010, Don Raff earned $1,000 interest at Ridge Savings Bank on a certificate of deposit scheduled to mature in 2011. In January 2011, before filing his 2010 income tax return, Raff incurred a forfeiture penalty of $500 for premature withdrawal of the funds. Raff should treat this $500 forfeiture penalty as a

a. Reduction of interest earned in 2010, so that only

$500 of such interest is taxable on Raff’s 2010 return.

b. Deduction from 2011 adjusted gross income, deductible only if Raff itemizes his deductions for 2011.

c. Penalty not deductible for tax purposes.

d. Deduction from gross income in arriving at 2011 adjusted gross income.