Gordon Gekko
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Why would there be? Nobody would buy this theoretical bond in today’s environment and then the value would immediately collapse.
Why would there be? Nobody would buy this theoretical bond in today’s environment and then the value would immediately collapse.Interesting angle. I presume that if a corporation issued a zero coupon bond there would be taxable imputed income, otherwise it would be a crude tax reduction scam. I would also presume that this accrual of interest would be hard coded from inception and would not vary with market movements, these being regarded as capital.
Now the TB31 is not so much a zero coupon bond as a bond with zero coupons, i.e. issued at c. par when the interest rate happened to be zero.
Zero-coupon bonds do have interest, it is paid at maturity along with the capital.Wrong - there is no annual accrual of interest. There is no interest - the clue is in the name "zero"
I think the key thing is being issued at par or close thereto. TB27 0.25% is probably a better example. It was issued when interest rates were around that level. It is now standing at a 2% p.a. yield which would be 0.25% p.a. taxable income plus 1.75% p.a. tax free gain.Why would there be? Nobody would buy this theoretical bond in today’s environment and then the value would immediately collapse.
Zero coupon bonds don’t pay interest!Zero-coupon bonds do have interest, it is paid at maturity along with the capital.
Can you give any reference or source for your finding please? That's what I am trying to find. That's the purpose for my query. I am not convinced there is no imputted interest type treatment in Ireland, despite feedback received.Zero coupon bonds don’t pay interest!
Redemption at par (100) when you’ve bought it at a discount is a capital event.
It’s often quite difficult to disprove something that’s nonsensical.Can you give any reference or source for your finding please? That's what I am trying to find. That's the purpose for my query. I am not convinced there is no imputted interest type treatment in Ireland, despite feedback received.
There is imputed interest because there's no coupon. Whether it's taxable as income or gains is a different question.If there’s no interest (i.e. no income/coupon), then there’s no imputed interest/income.
I repeat: TB 31 is not a ZCB but a full interest paying bond where the interest rate is 0%, as this is what was needed to be paid when it was issued at par. It is treated as a 0% interest paying bond throughout its life and any profits/losses are capital.
There is no imputed interest!There is imputed interest because there's no coupon. Whether it's taxable as income or gains is a different question.
Bonds are debt. If I lend you €90 and you pay me back €100 next week, have I made a capital gain or have I charged you €10 interest?
This is Ireland, so none of that is relevant.@Duke - what is 'TB 31'? (treasury bond 31?) What exactly is that?
@gordon, here's the explanation. "The difference between the discounted amount you pay for a zero coupon bond and the face amount you later receive is known as "imputed interest." This is interest that the IRS considers to have been paid, even if you haven't actually received it. Therefore, the IRS requires that you pay tax on this "phantom" income each year, just as you would pay tax on interest you received from a coupon bond" https://www.finra.org/investors/insights/zero-coupon-bonds
This is Ireland, so that’s all gibberish.I can go on the Treasury website today and buy a new T-bill from the US Government with a face value of $100 at a discounted price. The difference is the imputed interest.
Interest rates moving around and Johnny buying it off me later doesn't change that.
And you’ve been told on numerous occasions that it isn’t and that there’s no concept of imputed interest here in Ireland. You seem to be looking for an online reference for something that just doesn’t exist.Well, it's relevent to my question and the purpose of this discussion..which was whether imputted interest from US zero coupon treasury bonds are liable for interest income in Ireland, or if the imputted interest is instead liable for CGT.
See below. I myself prefer TB27 0.20% despite its taxable coupon, note that the coupon is actually .2159% despite the name (I attach a spreadsheet for calculating the after tax yield on TB 27). On the tax debate there is no imputed interest on any of these bonds as they were all issued at or around par and the coupon represents a fair interest, which happened to be 0% when TB 31 was issued. I feel sure that if a corporation issued debt at below par the Irish Revenue would regard the difference as imputed interest.@Duke - what is 'TB 31'? (treasury bond 31?) What exactly is that?
That's right. Bonds issued with a coupon rate of 0% are an anomaly of the zero to negative interest rate environment of the time. They are in theory paying a coupon but the coupon is €0.Now the TB31 is not so much a zero coupon bond as a bond with zero coupons, i.e. issued at c. par when the interest rate happened to be zero.
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