I have Israeli bonds (some given to us as gifts, some purchased; some in our SSNs, some in our children's SSNs under UTMA MA) that I believe are zero coupon bonds, for which we are sent 1099-OID statement each year.
Please verify that my understanding of each of these points is correct:
- For the bonds under our children's SSNs, I use the unearned income test (they have no earned income) to determine whether each child needs to file, and if the child doesn't need to file, then I don't need to report or pay taxes on the the 1099-OID income for that child.
- For the bonds under our SSNs, I report and pay interest on them each year, and then when the bond matures and we are sent the proceeds, I use a cost basis that is the same as the amount of money they send us, since I've already paid taxes through the income reported on the
- For bonds given to us as gifts, as long as we don't run afoul of the limits for tax-free gift giving from any individual in a given year, we don't have to pay taxes on the value of the bond when we receive it, i.e., its purchase price, and our cost basis then becomes that value. Then, when the bond matures, we're in the same situation as above, and our cost basis is the same as the proceeds because of the 1099-OIDs.
Have I got all that right?
Thanks,
Jonathan Kamens