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Taxation issue on a bond subscription

Indio, CA |

If a US resident invests in a US based bond with a tenure of 3 years which assures of a return 300 basis points over the LIBOR rate and assured addition of 10% bonus every year, payable at the end of tenure (36th month along with principal). How will it be taxed? For the 10% bonus addition will the investor be taxed even if it is not realized. Please remember the bonus addition is subject to certain risk factors, which may delay or result in non payment of bonus.

Attorney Answers 3


  1. If you are an individual, then you are on the cash basis of accounting. Therefore, you will be taxed on the cash you receive on the bond when you receive it.


  2. I agree with Attorney Givner.

    Law Offices of J Thomas Smith J.D., Ph.D 11500 Northwest Freeway, Suite 280 Houston, TX 77092 713-LAWYER-2 www.MyImmigrationLawyer.info NOTE: Responses are for the education of the community at large and is not intended to be "legal advice." No attorney-client relationship is established by responses or comments.


  3. I agree with Bruce. You are taxed on a cash basis. It is income when you receive the money.

    Tax Attorney J Anton Collins is a featured Tax Court and Criminal Tax Defense Attorney on Avvo. You may contact Attorney Collins directly at jcollins@jonescollins.com, or 877.376.2292, for more specific answers. This forum is merely for open, public discussion. Discussions in this open, online forum are not intended to create an attorney-client relationship. IRS CIRCULAR 230 DISCLOSURE NOTICE: IRS Circular 230 regulates written communications about federal tax matters between tax advisors and their clients. To the extent the preceding correspondence and/or any attachment is a written tax advice communication, it is not a full “covered opinion”. Accordingly, this advice is not intended and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS regarding the transaction or matters discussed herein. Each taxpayer should seek advice from an independent tax advisor with respect to any Federal tax issues, transactions or matters addressed, discussed or referenced herein based upon his, her or its particular circumstances.

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