Author Topic: Savings/investments/bonds Master Thread.  (Read 185687 times)

Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #520 on: February 21, 2023, 10:20:48 PM »
Bump. Anyone know?
Not understanding the question. Interest on T-bills is exempt from state/local taxes.
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Offline aygart

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Re: Savings/investments/bonds Master Thread.
« Reply #521 on: February 21, 2023, 10:22:13 PM »
Not understanding the question. Interest on T-bills is exempt from state/local taxes.
If you buy it with one day remaining does the entire interest portion from the entire term remain tax exempt for the buyer? The seller had a capital gain so now the buyer should have a capital loss of principal and the interest still tax exempt for the full amount.
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Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #522 on: February 21, 2023, 10:26:13 PM »
If you buy it with one day remaining does the entire interest portion from the entire term remain tax exempt for the buyer?
Yes but you are talking about 1 day's interest.
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Offline aygart

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Re: Savings/investments/bonds Master Thread.
« Reply #523 on: February 21, 2023, 10:28:00 PM »
Yes but you are talking about 1 day's interest.

Why not for the whole term? just like it was a capital gain and not interest to the seller.
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Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #524 on: February 21, 2023, 10:30:35 PM »
Why not for the whole term? just like it was a capital gain and not interest to the seller.
Maybe I am not understanding.
Let's say I buy with one day let to maturity. 1k bond will cost me 999.xx
I will receive xx in interest in one day when it matures.
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Offline aygart

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Re: Savings/investments/bonds Master Thread.
« Reply #525 on: February 21, 2023, 10:56:25 PM »
Maybe I am not understanding.
Let's say I buy with one day let to maturity. 1k bond will cost me 999.xx
I will receive xx in interest in one day when it matures.


But technically at maturity you are getting the interest for the entire term since the seller did not receive any.
Feelings don't care about your facts

Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #526 on: February 21, 2023, 11:09:20 PM »
But technically at maturity you are getting the interest for the entire term since the seller did not receive any.
No, he is getting the interest as capital gains.
I buy 1k at $950
I sell to you with one day left at $999
You get 1k at maturity.
I get $49 in capital gains and you get $1 in interest.
Hope this makes sense.
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Offline aygart

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Re: Savings/investments/bonds Master Thread.
« Reply #527 on: February 21, 2023, 11:14:34 PM »
No, he is getting the interest as capital gains.
I buy 1k at $950
I sell to you with one day left at $999
You get 1k at maturity.
I get $49 in capital gains and you get $1 in interest.
Hope this makes sense.

It should be a capital loss of $49 and $50 of interest, but I can see why the IRS wouldn't classify it that way.
Feelings don't care about your facts

Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #528 on: February 21, 2023, 11:16:39 PM »
It should be a capital loss of $49 and $50 of interest, but I can see why the IRS wouldn't classify it that way.
Who had a loss?
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Offline aygart

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Re: Savings/investments/bonds Master Thread.
« Reply #529 on: February 21, 2023, 11:19:05 PM »
Who had a loss?
The buyer since $50 of what he got should be interest.
Feelings don't care about your facts

Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #530 on: February 21, 2023, 11:21:35 PM »
The buyer since $50 of what he got should be interest.
You bought at 999 and received 1k. That is $1. You lost me. No one had a loss. Both made money. One in capital gains and the other it was interest.
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Offline Joe4007

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Re: Savings/investments/bonds Master Thread.
« Reply #531 on: February 22, 2023, 02:09:03 PM »
I can see them and have seen them not cover deposits over the limits.
Examples?

Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #532 on: February 22, 2023, 02:14:05 PM »
Examples?
80's saving and loan crisis comes to mind.
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Offline Joe4007

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Re: Savings/investments/bonds Master Thread.
« Reply #533 on: February 22, 2023, 02:22:18 PM »
You bought at 999 and received 1k. That is $1. You lost me. No one had a loss. Both made money. One in capital gains and the other it was interest.
I see what @aygart is saying. If you buy at 950 and sell at 999 and that is considered a CG, not interest, apparently there's something that causes the interest only to be recognized at the end. If that is the case, one would assume the buyer (holder at maturity) would get the full interest on a 1099-INT (since we've established that the brokerage doesn't pro rate the interest) and have a capital loss of $49 since the cost basis was 999 and the proceeds 950 (as 50 is already being attributed to interest).

Also, is the same true for treasury notes? If so, it creates an interesting opportunity to sell before maturity and pay the lower long term CG tax rate instead of ordinary on interest income.

Another interesting scenario I can think of is if someone has unused capital losses they'd want to sell treasuries before maturity so that it becomes CG instead of interest. 

Offline Joe4007

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Re: Savings/investments/bonds Master Thread.
« Reply #534 on: February 22, 2023, 02:23:18 PM »
80's saving and loan crisis comes to mind.
Figured. That was a different era before the fed put. I cannot see it happening nowadays (of course anything can happen - just the way I see it).

Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #535 on: February 22, 2023, 02:28:32 PM »
If that is the case, one would assume the buyer (holder at maturity) would get the full interest on a 1099-INT (since we've established that the brokerage doesn't pro rate the interest) and have a capital loss of $49 since the cost basis was 999 and the proceeds 950 (as 50 is already being attributed to interest).
That is nuts. You bought at 999 and it matured at 1k. You have $1 no matter if you want to call it interest or capital gains.
Do you understand that all T-bills sold at action by the treasury are not new issues? You don't to get charged back interest or capital gains?
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Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #536 on: February 22, 2023, 02:30:32 PM »
Figured. That was a different era before the fed put. I cannot see it happening nowadays (of course anything can happen - just the way I see it).
Google as there have been others since then. When a bank goes bust the takeover bank does not always cover uninsured deposits.
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Offline Joe4007

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Re: Savings/investments/bonds Master Thread.
« Reply #537 on: February 22, 2023, 02:37:37 PM »
That is nuts. You bought at 999 and it matured at 1k. You have $1 no matter if you want to call it interest or capital gains.
That is true. 50 (interest) - 49 (CL) = 1. And interest vs. capital gain is a huge difference for some.

Again, not saying that is how it's reported, I have no idea. Just saying that if seller gets 49 of CG and no interest it stands to reason that's how it would be reported for buyer.
Quote
Do you understand that all T-bills sold at action by the treasury are not new issues? You don't to get charged back interest or capital gains?
I don't know that. Please elaborate.

Offline Joe4007

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Re: Savings/investments/bonds Master Thread.
« Reply #538 on: February 22, 2023, 02:43:48 PM »
Google as there have been others since then. When a bank goes bust the takeover bank does not always cover uninsured deposits.
Interesting. Found this and it seems like while most acquiring banks take over the full deposit balance, there are indeed some that only honored the insured value.

Good to know!

Offline CountValentine

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Re: Savings/investments/bonds Master Thread.
« Reply #539 on: February 22, 2023, 03:22:03 PM »
That is true. 50 (interest) - 49 (CL) = 1. And interest vs. capital gain is a huge difference for some.
The buyer who buys it at 999 is getting no CG or interest at this point. It just doesn't work that way.
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