Question
In: Finance
A company has purchased a bond at a price of $956. The par value of the...
A company has purchased a bond at a price of $956. The par value of the bond is $1,000 and the original term to maturity is five years. The applicable capital gains tax rate is 25%. Based on the information provided on the bond issue, the company:
A. will not need to pay any capital gains taxes on the maturity of the bond issue.
B. will need to declare capital gains of $44 at the maturity of the bond issue only.
C. will need to include $8.8 in taxable income every tax year for 5 years and declare a capital gain of $44 at maturity.
Solutions
Expert Solution
Bond is purchased at $956
Bond will be redeemed at par value of $1000, it would be consider at sale price for capital gain.
Capital Gain Tax is always payable on the period or event after it is been realized i.e., the sale date. Thus, the Capital gain of $44 ($1000 - $956) will need to declared at the maturity of bond only.
Thus, Option B
jeff jeffy answered 2 years agoRelated Solutions
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