How is accrued interest on a bond handled?


N

NadCixelsyd

On December 15th, I buy a bond which will pay $425 interest
on February first. I pay $10500 for the bond and $322
accrued interest. How is the $322 handled this year? How
is the $425 handled next year?

If they had occured in the same year, do I simply report the
$103 in interest or is it more compled?
 
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E

ed

NadCixelsyd said:
On December 15th, I buy a bond which will pay $425 interest
on February first. I pay $10500 for the bond and $322
accrued interest. How is the $322 handled this year? How
is the $425 handled next year?

If they had occured in the same year, do I simply report the
$103 in interest. Don't mention the or is it more compled?
No, that's how it works. Ignore the $322 for now.. Next
year declare the $425 and deduct the $322 as "nominee
interest" on Schedule B. So, you'll pay tax on $103 next
year. Do not include the $322 in your basis when you
sell, nor the accrued interest in your sales proceeds you
will get when you sell when computing your capital gain or
loss. pay income tax on the accrued interest in the year you
sell the bond.


ed
 
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A

Arthur Kamlet

On December 15th, I buy a bond which will pay $425 interest
No, that's how it works. Ignore the $322 for now.. Next
year declare the $425 and deduct the $322 as "nominee
interest" on Schedule B. So, you'll pay tax on $103 next
year. Do not include the $322 in your basis when you
sell, nor the accrued interest in your sales proceeds you
will get when you sell when computing your capital gain or
loss. pay income tax on the accrued interest in the year you
sell the bond.
I agree with all above except I'd label the $322 "Accrued
Interest" on schedule B.

Nominee interest is where you act as Nominee for another
known party and Nominee Interest over $600 to that party,
not your spouse, requires that you issue a 1099-INT.

With accrued interest you cannot issue a 1099-INT to the
party, and wouldn't want to mess with that anyway.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
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