The Tax Implications Of Selling A Brokered CD

A parter has noticed that there are many CDs offered at their brokerage platform that have published rate well below the market. The difference is made up by purchasing the CD below market value. If the partner purchases a two-year CD below par and then receives full par at maturity, is that increase in value considered a long-term capital gain? That would be a tax benefit over interest income.

Shana says it could be the case. If you’re buying your CDs in your IRA account or your Roth account, it doesn’t matter because those distributions are taxed differently. But if you’re purchasing it in a taxable type of account, there could be. You may also have some interest, that is accrued. Some of it may be a gain, but your brokerage account will straighten all that out at the end of the year when they send you your tax reporting documents.

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