Question about a tax implications of a foreign CD, with interest payable at a later date

In 2012, I opened a CD in India (NRE fixed deposit) for a term of 10 years. I elected to compound the interest, and not receive quarterly interest payments.
My question is: Do I have to report the interest income on my 2012 tax return, even though I have not received the interest payment? Thanks
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 4/7/13 8:37 PM, John Bliss wrote:

elected to compound the interest, and not receive quarterly interest payments. My question is: Do I have to report the interest income on my 2012 tax return, even though I have not received the interest payment? Thanks

You report interest income either when you receive it or when the bank credits your account AND you can withdraw it. So.... if the bank is not going to credit your account and give you access to the interest until the end of the 10 year period, there is no interest income to declare until the end of the 10 year period.
--
Alan
http://taxtopics.net
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

elected to compound the interest, and not receive quarterly interest payments. My question is: Do I have to report the interest income on my 2012 tax return, even though I have not received the interest payment? Thanks

Are you sure about that? I've not read Pub 1212 in some time, but I believe that CDs with a term of longer than one year that do not give you access to the interest until maturity are treated as zero-coupon bonds and thus the holder is required to report OID annually.
--
Rich Carreiro snipped-for-privacy@rlcarr.com

Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Monday, April 8, 2013 4:18:10 AM UTC-4, Rich Carreiro wrote:

I elected to compound the interest, and not receive quarterly interest payments. My question is: Do I have to report the interest income on my 2012 tax return, even though I have not received the interest payment? Thanks

My understanding is the same as Rich's. OID if term greater than one year.
Ira Smilovitz
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Monday, April 8, 2013 9:16:31 AM UTC-6, ira smilovitz wrote:

Yeah... I forgot about that rule but it is not the term of the CD that matters. It is whether the interest being credited goes beyond a year. E.g., I have a 5 year CD that credits me on 12/31 each year. No OID. I have a 5 year CD that credits me at the end of the 5 years. OID
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Sunday, April 7, 2013 9:37:27 PM UTC-5, John Bliss wrote:

elected to compound the interest, and not receive quarterly interest payments. My question is: Do I have to report the interest income on my 2012 tax return, even though I have not received the interest payment? Thanks -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2011) - All rights reserved. >> << ------------------------------------------------------- >>
Few more items to ponder.
a. Assuming that you calculate accrued interest income and convert it to USD, if dollar is stronger your original principal is lower value as of 31 Dec 2012. How do you or can you account for the loss of principal value. If not done now, if loss is accounted for after 10 years it becomes a Long term loss which is a lower rate.
b. How about the interest income declared ? If say the accrued interest income is calculated using ex: Rs. 55 / USD. but after 10 years when you close out the CD the forex rate is Rs. 85 / USD. how can those losses be accounted for ?
Thanks Sid
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here. All logos and trade names are the property of their respective owners.

Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.