[opie]

Hello:

I see many instances where a Realized Gains & Loss Report will show a capital loss on a redeemed bond. Generally redemptions should not show any gain or loss. The one I am looking at is for a bond purchases above par ($95,000 x 1.0376 = $98,572) and, of course was redeemed at $95,000. The report shows the $3,572 as a capital loss. In my confused little mind, I keep thinking the $3,572 is an interest cost, paid up front in order to garner a higher interest payout over the term of the investment and should be claimed as a carrying charge this year.

Just wondering how everyone else treats these?

[ChrisG]

Can't the interest paid be deducted in the year of purchase?

[ChrisG]

Let me clarify. The interest can be deducted in the year that you purchase the bond if you receive an interest payment equal or more than the accrued interest you paid when purchasing the bond.

I'm kind of puzzled why the OP is having difficulty with this process. I wonder how many deductions were missed on past returns. He refers to "having seen many instances" of this. Adjustments are probably in order.

[Clamato]

Quote

Let me clarify. The interest can be deducted in the year that you purchase the bond if you receive an interest payment equal or more than the accrued interest you paid when purchasing the bond.

Interesting! What are you saying here?

Most likely you purchased the bond to pay out in 2 to 5 years. So you have a negative actual interest (premium) in the year of purchase but no offsetting actual positive interest until the maturity date.

Now under the accrual method you would have some interest to claim against the premium the first year and the rest in years 2, 3, 4, 5.

So how would that work if the bond was your only investment? You cannot have a negative interest on Schedule 4 that carries over to a negative on line 121.

[ChrisG]

Clamato, on 15 April 2011 - 04:33 PM, said:

Interesting! What are you saying here?

Most likely you purchased the bond to pay out in 2 to 5 years. So you have a negative actual interest (premium) in the year of purchase but no offsetting actual positive interest until the maturity date.

Now under the accrual method you would have some interest to claim against the premium the first year and the rest in years 2, 3, 4, 5.

So how would that work if the bond was your only investment? You cannot have a negative interest on Schedule 4 that carries over to a negative on line 121.

Well Clamjuice it appears that your clients, er, your family, might be taking their business elsewhere. This thread goes a long way in demonstrating the dangers of doing your own taxes or paying someone with a big calculator to prepare them at the kitchen table. What you are asking would require a course or at least a seminar on bond investing and taxation. And you would still not learn everything. I'm a bit too busy these days to provide this type of pro bono service. But have look at this simplified guide and read the part in the question section:

http://blog.taxresou...re-bonds-taxed/

[Clamato]

ChrisG, on 15 April 2011 - 08:21 PM, said:

Well Clamjuice it appears that your clients, er, your family, might be taking their business elsewhere. This thread goes a long way in demonstrating the dangers of doing your own taxes or paying someone with a big calculator to prepare them at the kitchen table. What you are asking would require a course or at least a seminar on bond investing and taxation. And you would still not learn everything. I'm a bit too busy these days to provide this type of pro bono service. But have look at this simplified guide and read the part in the question section:

http://blog.taxresou...re-bonds-taxed/

Thanks ChrisG, I appreciate the link and understand you would not have the time if it is not a simple issue. I'll do some more research on it because I am curious.

You will be able to sleep soundly because the family member's returns I do are only investing in GIC's and equity issues and not bonds. The more wealthy family members can afford to and do hire tax and accounting advisers.