Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q: I bought a zero coupon Treasury bond in 1995 and sold it in 1996. Where do I show the gain on that particular transaction -- Schedule B or Schedule D?
A: A: The activity from holding and then selling this bond needs to be reported on Schedule B and on Schedule D for 1996. To the extent that interest has accrued in 1996 on this bond while you held it, this income should be reported on Schedule B. The sale of the bond should be reported on Schedule D as either a long-term or short-term transaction, depending on whether the bond was held for more than one year (long-term) or not. Be sure to add to the original purchase price of the bond and the interest income reported in 1995 and 1996. Neither the interest reported from the bond nor the gain, if any,on its disposition is taxable for the purpose of Maryland tax.
Q: I paid a premium when I bought a municipal bond, which has now matured. Can I take a Schedule D loss on the premium I paid? Alternatively, if I bought a municipal bond at discount, do I show a Schedule D gain when it matures?
A: Premiums paid or discount received on the purchase of a municipal bond must be amortized annually over the life of the bond. This means, by having held the bond until maturity, you would not have to report gain or loss on the redemption of the bond.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
Readers can find an archive of tax questions answered thus far plus links to other tax information on The Sun's Web site -- www.sunspot.net.
Pub Date: 4/10/97