TIPS (Treasury Inflation Protected Securities)

Jul 18, 2005 2 Replies
N

Q 2005, Windows XP. When downloading a purchase of these bonds, Q assumes that the total cost that it sees in the download minus the stated price per bond results in the difference being attributed to accrued interest. Q doesn't recognize that the purchase price per bond is applied to the inflated value of the bond rather than the face amount, and this results in a higher purchase cost, which Q tries to reconcile by inflating the accrued interest. If this is unclear, I can provide an example



Thanks


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Check with an accountant but it seems to me you are creating a distinction without a difference. As I understand TIPS, the annual increase in face value due to inflation must be reported annually as interest. Therefore the amounts Q is treating as interest would in fact still be accrued interest, wouldn't they? (See IRS pub 550 for more info)

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