Quote: (02-18-2012 10:54 PM)Entropy Wrote:
Quote: (02-18-2012 06:16 PM)Tigre Wrote:
Though I have limited experience with bonds, I don't understand what kind of holding vehicle would let you hold the bond for a 10 year term, but treat your periodic bond interest earnings as a capital gain.
Well here is the link: http://finance.yahoo.com/education/bond/...Bonds_Work
"Another advantage of Treasuries is that interest payments are exempt from local and state taxes (however, not from Federal income taxes)".
Nobody escape the taxman, amigo. You honestly think they will just let you collect a yearly interest and go free without paying taxes on that? lad, you pay taxes on dividends that are not reinvested.
Wow, the more I read from you, the less I think you know. Have you actually done any of this in real life? Or are you some kind of Google hero repeating stuff he's heard about but never done?
I was starting off trying to be kind, thinking you just didn't understand the correct names of terms as we use them in the English language. Like, understanding the concept but using the wrong name for it.
But this is basic stuff you can't get your head around.
In the simplest possible terms.
Capital gain is measured when you dispose of the asset. If you buy a house and rent it out for 15 years:
1) Every year you declare rental income less expenses and pay tax on that.
2) When you finally sell, you declare the appreciation in value of your asset as a capital gain, then pay tax on that (once). The income generated in (1) is not a capital gain.
So how do you figure using CGT rates to get tax owing for a year's worth of interest income? Nothing has been bought or sold, it's the wrong class. You should really be using the marginal tax rate.
Also, even though we have established that you're using the wrong rate, are you sure that 15% CGT rate for Brazil is even correct for a foreigner? Cause when I looked into it, I found this:
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http://www.reuters.com/article/2010/10/2...7020101025
BRASILIA, Oct 25 (Reuters) - Brazil's finance minister on Monday praised progress by the Group of 20 economies on global currency issues and ruled out a new capital gains tax on foreign holdings of local bonds to curb a domestic currency rally.
Brazil would not reinstate a capital gains tax on bond holdings by foreigners, Mantega said, adding: "It's not being considered."
But of course, if you just searched up a Wikipedia page and stopped there, you might think the rate is 15% for non-resident foreigners, as you stated.
There are a few other things you misunderstood, but I'll leave it at that for now. Here is a link about US tax treatment of bonds, if you want to know more. The first paragraph is enough to set things straight: http://www.nysscpa.org/cpajournal/2005/3...ls/p42.htm
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The tax laws governing the returns from holding bonds are complex and change frequently. The law distinguishes between the two components of return: interest income and capital gain or loss. Capital gains or losses are further classified as short term (bonds owned for one year or less) or long term. Short-term gain is taxed at the marginal tax rate on ordinary income, currently as high as 35%. For investors in the 25% bracket or higher, the current long-term capital gains tax rate is 15% (5% for investors in the 10% and 15% brackets). Interest income is always taxed at the investor’s marginal tax rate.