zero coupon bonds


C

Claire Oberhausen

I am thinking of transfering from Quicken and imported my database and am
trying out Money.

I can't figure out how to book the yearly implied interest on the zero
coupon bonds that you get on a 1099. On Quicken you book the interest and
then add a transaction called "return of capital" for the same amount as a
negative number. This adds to the cost basis of the bond.

On my imported database, the same entry reduces the cost basis. I can't
find any help on the money help pages.
 
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C

Cal Learner-- MVP

I am thinking of transfering from Quicken and imported my database and am
trying out Money.

I can't figure out how to book the yearly implied interest on the zero
coupon bonds that you get on a 1099. On Quicken you book the interest and
then add a transaction called "return of capital" for the same amount as a
negative number. This adds to the cost basis of the bond.

On my imported database, the same entry reduces the cost basis. I can't
find any help on the money help pages.
As you have found, Money unfortunately does not handle a negative
return of capital right. There are other cases where a negative ROC
could help but is unavailable. Reorg fees is one other such case.

What you can do is to enter the interest as reinvested interest.
That successfully raises your TOTAL basis, but it increases your
Quantity of the bond, and there is no way to do a Split on a bond.

Perhaps the original Buy could be modified to pre-reduce the
Quantity to a value less than face value such that with a known
sequence of Reinvest Dividend transactions, you end up at the actual
par amount as the Quantity.

http://support.microsoft.com/default.aspx?scid=kb;en-us;240555&Product=mny
does not address this issue.
 
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M

Michael Gordon, MVP

If the bonds are municipals, which they usually are, and they're going to be
held to maturity, then just adjusting the price to reflect the imputed
interest often works. Just make a mental note that there shouldn't be a
capital gain when the bond matures.
 

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