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Posted by Taxlover on February 13, 2008, 7:56 pm
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My 2007 Tax Reporting Statement from Fidelity reports this on bonds
purchased. It also adjusts the cost basis for the accrued interest on bonds
I have sold.
Do I just ignore the accrued interest, since Fidelity keeps track of it?
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Posted by Benjamin Yazersky CPA on February 13, 2008, 9:04 pm
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> My 2007 Tax Reporting Statement from Fidelity reports this on bonds
> purchased. It also adjusts the cost basis for the accrued interest on bonds
> I have sold.
>
> Do I just ignore the accrued interest, since Fidelity keeps track of it?
>
> --
Accrued interest paid on bonds purchased gets deducted from interest
income on the bonds.
Likewise, accrued interest received on bonds sold gets added to the
interest income on the bonds.
The brokerage firm keeping track of the info should be helpful in
preparing your tax returns.
You should give this info to your CPA/tax professional.
It is not to be ignored.
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<<< Benjamin Yazersky, CPA [NJ & NY] >>>
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Posted by removeps-groups@yahoo.com on February 14, 2008, 5:09 pm
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> Accrued interest paid on bonds purchased gets deducted from interest
> income on the bonds.
> Likewise, accrued interest received on bonds sold gets added to the
> interest income on the bonds.
Correct, but one more question. Does the accrued interest also affect
the cost basis and proceeds for capital gain purposes? Say you bought
bonds for $10,200 of which $200 was for accrued interest, and you sell
the bonds for $11,400 of which $300 is for accrued interest. Then for
capital gains, the profit is (11400-300)-(10200-200)=1100. As long as
Fidelity subtracts the accrued interest from both the cost and the
sale, it should be OK. Is this right?
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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Posted by Arthur Kamlet on February 15, 2008, 10:02 pm
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>> Accrued interest paid on bonds purchased gets deducted from interest
>> income on the bonds.
>> Likewise, accrued interest received on bonds sold gets added to the
>> interest income on the bonds.
>
>Correct, but one more question. Does the accrued interest also affect
>the cost basis and proceeds for capital gain purposes? Say you bought
>bonds for $10,200 of which $200 was for accrued interest, and you sell
>the bonds for $11,400 of which $300 is for accrued interest. Then for
>capital gains, the profit is (11400-300)-(10200-200)=1100. As long as
>Fidelity subtracts the accrued interest from both the cost and the
>sale, it should be OK. Is this right?
No, the accrued interest is not capitalized into the bond cost.
So the accrued interest is not part of the basis.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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Posted by removeps-groups@yahoo.com on February 17, 2008, 5:14 pm
Please log in for more thread options On Feb 15, 7:02 pm, kam...@panix.com (Arthur Kamlet) wrote:
> No, theaccruedinterestis not capitalized into the bond cost.
>
> So theaccruedinterestis not part of the basis.
This doesn't make sense. When I buy a bond at my brokerage, it says
for example
Face Value = 10,000
Trade Type = Principal
Issue = T Note
Coupon = 4.875
Maturity = 08/31/2008
Qty = 10
Price = 101.76562500
Principal = $10,176.56
Accrued Int = $231.70 (173 days)
Trans Fee = 0
Net Money = $10,408.26
So what I pay for the bond is $10,408.26.
But the principal is $10,176.56, and I believe this is what should be
used in the capital gain calculation when you sell the bond.
The interest of $231.70 gets subtracted out of my net interest for the
year. At 4.875% I should get $487.5 a year, so my interest repoted on
Schedule B will be either 487.50-231.70=255.8, or 487.50 on one line
and (231.70) on the next line.
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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<< Copyright (2007) - All rights reserved. >>
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