How would you account for a 5 year fixed rate bond paying interest and capital at the end of the 5 year period? Would you use the accruals concept and declare a fifth of the interest on each of the five annual tax returns, even though no interest is actually received until the end of the fifth year. Or would you declare all the interest when it is paid in the fifth year? Thanks
If you have a three-year bond that does not allow any access throughout the term, the interest earned will contribute to your PSA at the end of the term. This would be the case regardless of whether it paid interest annually or on maturity.