Taxation issue on a bond subscription

Asked over 1 year ago - 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. Bruce Givner

    Contributor Level 19

    4

    Lawyers agree

    Answered . 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. J. Thomas Smith Ph.D.

    Pro

    Contributor Level 20

    3

    Lawyers agree

    Answered . 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.... more
  3. Jeffrey Anton Collins

    Contributor Level 10

    1

    Lawyer agrees

    Answered . 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... more

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