Tax on bonds

There is no mystery here.
Irish Treasury Bills are just like US Treasury Bills. They are less than 1 year duration so the idea of a coupon rate doesn’t really fit. Instead they are issued at a discount. See 1(c) of the above information memorandum. Section 5 of the IM makes it clear that the discount is taxed as income.
 
Treasury bills are short dated securities of less than 1 year

No retail investor buys them directly from NTMA.

If they are bought on the secondary market, then there is no discount - only a purchase price below par abd and expected capital gains on redemption
 
If one sells an ordinary Govie, full of coupon, the accrued interest/coupon part of the sale is treated as income. Otherwise Govies could be completely tax free by “bond washing”. The original discount on a Treasury Bill is treated in the same way as a coupon.
Imputed taxable interest is alive and well in Ireland.
 
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Duke of Marmalade said:
See 1(c) of the above information memorandum. Section 5 of the IM makes it clear that the discount is taxed as income.
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So the amount discounted from a zero-coupon bond when issued is the interest attributed to it and is subject to income tax not CGT.

Discounted Value = Nominal Value / (1+ (interest rate/360) x n)
the discount element payable on an ITB is assessable to income tax
 
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Duke of Marmalade said:
If one sells an ordinary Govie, full of coupon, the accrued interest/coupon part of the sale is treated as income. Otherwise Govies could be completely tax free by “bond washing”. The original discount on a Treasury Bill is treated in the same way as a coupon.
Imputed taxable interest is alive and well in Ireland.
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‘Bond washing’ and the associated anti-avoidance legislation is something completely different.
 
Gordon Gekko said:
‘Bond washing’ and the associated anti-avoidance legislation is something completely different.
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This rabbit hole started when @TravisT asked about the tax treatment in Ireland of US Treasury Bills. He suggested the discount would be taxed as income. You dismissed this suggestion out of hand as something foreigners might do but not here in Ireland. I point out that the NTMA information memorandum explains that indeed the Irish Revenue would apply the same approach to Treasury Bills as the US. @jpd dismisses that by arguing that nobody in Ireland can own a Treasury Bill other than through the secondary market with which you indicated your agreement with a "like". I presume that in talking about the taxation of a non existent constituency you are accusing the NTMA of having their intellectual pants down.
Anyway, to get this back on track are you still adamant that the Irish Revenue would treat the discount on US TBs as capital gain?
 
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Duke of Marmalade said:
This rabbit hole started when @TravisT asked about the tax treatment in Ireland of US Treasury Bills. He suggested the discount would be taxed as income. You dismissed this suggestion out of hand as something foreigners might do but not here in Ireland. I point out that the NTMA information memorandum explains that indeed the Irish Revenue would apply the same approach to Treasury Bills as the US. @jpd dismisses that by arguing that nobody in Ireland can own a Treasury Bill other than through the secondary market with which you indicated your agreement with a "like". I presume that in talking about the taxation of a non existent constituency you are accusing the NTMA of having their intellectual pants down.
Anyway, to get this back on track are you still adamant that the Irish Revenue would treat the discount on US TBs as capital gain?
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Have you ever seen an individual own an NTMA Treasury Bill from issuance? I haven’t.
 
Gordon Gekko said:
Have you ever seen an individual own an NTMA Treasury Bill from issuance? I haven’t.
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Stop digging.
I have never seen anybody holding a US TB from issuance or in any other context. But @TravisT seems to be proof that such a strange animal exists. The NTMA IM is a completely unambiguous statement of how the Revenue would regard these. Do you agree?
 
jpd said:
Treasury bills are short dated securities of less than 1 year

No retail investor buys them directly from NTMA.

If they are bought on the secondary market, then there is no discount - only a purchase price below par abd and expected capital gains on redemption
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NTMA said:
In general, where the holder of an ITB is an Irish resident taxpayer, the discount element payable on an ITB is assessable to income tax...
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So you are arguing that this is a vacuous statement. I presume you agree with @Gordon Gekko that this is just the NTMA getting their intellectual thrills.
 
Duke of Marmalade said:
Stop digging.
I have never seen anybody holding a US TB from issuance or in any other context. But @TravisT seems to be proof that such a strange animal exists. The NTMA IM is a completely unambiguous statement of how the Revenue would regard these. Do you agree?
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I don’t need to dig. This is your rabbit hole…an unnecessary overcomplication of matters, turning a simple discussion into one for a breakout group at the Smurfit MSc in Finance.
 
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A zero-coupon bond is an uncomplicated instrument. Pay money now, get money later. The difference is interest. The denomination is irrelevant.
 
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Gordon Gekko said:
I don’t need to dig. This is your rabbit hole…an unnecessary overcomplication of matters, turning a simple discussion into one for a breakout group at the Smurfit MSc in Finance.
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Can you hear me down there? You certainly aren’t listening. I note that you have downgraded the allegory.
What is your current answer to @TravisT kindergarten question? Would the Irish Revenue treat the discount on US Treasury bills as income or capital?
 
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Duke of Marmalade said:
Can you hear me down there? You certainly aren’t listening. I note that you have downgraded the allegory.
What is your current answer to @TravisT kindergarten question? Would the Irish Revenue treat the discount on US Treasury bills as income or capital?
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That wasn’t his/her question. You’ve introduced the complexity and the rabbit hole. It wasn’t even his/her initial query that started the thread. As is your way, you’ve gone out of your way to overcomplicate the matter. You’re the one who has introduced the concept of an individual investor buying Irish government bonds at issuance rather than in the open market.
 
Gordon Gekko said:
That wasn’t his/her question. You’ve introduced the complexity and the rabbit hole. It wasn’t even his/her initial query that started the thread. As is your way, you’ve gone out of your way to overcomplicate the matter. You’re the one who has introduced the concept of an individual investor buying Irish government bonds at issuance rather than in the open market.
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The query that started the thread was answered in post #2.
The query that started the rabbit hole was from @TravisT.
TravisT said:
Going back to this, are you sure there’s a cgt gain on US Bond maturing when bought at a discount? (Zero coupon bonds)

Gain is reported as interest income code 01 on IRS form 1042-S.
Looking for correct place to put on Revenue Form 11.
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To which you replied that this was all "gibberish"; we're in Ireland not the US.
Is that still your answer? (third time of asking)
If it is then AAM has failed @TravisT as they have received conflicting answers and have no option but to ask Revenue.
 
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