de minimis tax rule


Requires capital gains taxes are paid on bonds if the bond was purchased at a discount price which is greater than a quarter point per year between the day it was purchased and the maturity date. To calculate whether or not you need to pay de minimis tax on your bond, determine the number of years between the date you purchased the bond and the maturity date then multiple by .25. Subtract the amount you get from that calculation from the bond's par value. If the amount is higher than the purchase price, you need to pay capital gains tax.

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The de minimis tax rule was a really interesting thing to me and I liked the rules that it set for us.

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Because of the De Minimis tax rule, bond holders sometimes have to pay an additional tax if the bond sale price was discounted past a particular point.

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DE MINIMIS TAX RULE A rule that states that capital gains tax must be paid on a bond if the bond was purchased at a discount to the face value in excess of a quarter point per year between the time of acquisition and maturity. The reason for the capital gains tax is that the bondholder gains on the difference between the price paid and the price received at maturity, which is considered a capital gain.

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