Capital Gains on Government Bonds

RWK | Dec 6, 2024 | 94 posts since 2024

Can I get a quick confirmation? I'm not looking for legal advice just a confirmation that my thinking is accurate.

Hypothetically, if someone is purchasing 250k 2 year gov. bonds for $235k with a total face value of $250k the difference of $15k would be long term capital gains and a loss carryforward of $15k would cancel any taxes due on that amount if held to maturity. Just the interest on the coupons woud be taxed as ordinary income.

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MAKNYC | Dec 6, 2024 | 324 posts since 2015

Unfortunately no. The $15k could be taxable to you at maturity (or you can choose to annually accrete), but not as a capital gain. It would be ordinary income, treated as additional interest income. So you could not offset it against a capital loss. (except for the $3k annually that is allowed if you have net capital losses in a given year)

RWK | Dec 6, 2024 | 94 posts since 2024

Thanks MAKNYC .
I've purchased bonds but not at a discount to par. It looks like I owe my grandson dinner at his restaurant of choice. I can only imagine what he's going to choose.

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