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Taxes Exact: Taxes on Bonds, Dividends, Etc.

Dashboard > Chapter 20: Taxes (But Fortunately No Death) > Taxes Exact: Taxes on Bonds, Dividends, Etc.

Taxes Exact: Taxes on Bonds, Dividends, Etc.

If this concept is hard to visualize, think of the case if you purchased a coupon-paying bond at a discount. If you paid 95, and the bond pays 100 at maturity, but you were getting the coupon interest all along, what happens to the difference between par and your purchase price? Hint: it doesn't just go away. The $5 is a capital gain. The difference is that with the zero coupon bond it's a little harder to figure out what constitutes the capital gain component. You won't have to do...

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