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Post by teapot on Oct 23, 2023 17:45:39 GMT
Hi,
In a taxable account, if you have a gain from buy/sell treasury ETF (e.g. USFR, TFLO), are the gain treated as capital gain or treasury interests? Thanks.
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Post by yogibearbull on Oct 23, 2023 18:02:27 GMT
No. Why would the tax rules be different for Treasury ETFs? Only their interest derived from Treasury holdings gets special treatment (exclusion from state/local taxes). If they are using Treasury derivatives for income, even that won't be counted.
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Post by fishingrod on Oct 23, 2023 18:34:20 GMT
Hi, In a taxable account, if you have a gain from buy/sell treasury ETF (e.g. USFR, TFLO), are the gain treated as capital gain or treasury interests? Thanks. The sale of treasury ETF will incur capital gain or loss. The interest from Treasuries as stated get State, local tax exemption. |
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Post by teapot on Oct 23, 2023 20:05:46 GMT
Then there is a difference between buying treasury bill directly vs treasury ETF in taxable account. Fidelity fixed income told me when one sell treasury before maturity, all gain would be counted as interests.
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Post by yogibearbull on Oct 23, 2023 21:04:57 GMT
teapot , not clear what you asked and what the Fido Rep said. T-Bills are sold at discount, and the the excess value received at maturity or sale before maturity will be "interest"; it will be exempt from state/local tax. But if you buy T-Note or T-Bond and sell before maturity in the secondary market (you cannot do this at Treasury Direct, so you would have to first transfer them to brokerage), that may have capital gain or loss (ST or LT) and would be treated as such (ST-CG or LT-CG). It won't be considered "Treasury interest exempt from local/state taxes". This tax treatment is similar to that for other bonds - munis, corps, held by individuals or funds. www.businessinsider.com/personal-finance/how-bonds-are-taxed
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Post by teapot on Oct 23, 2023 22:45:36 GMT
teapot , not clear what you asked and what the Fido Rep said. T-Bills are sold at discount, and the the excess value received at maturity or sale before maturity will be "interest"; it will be exempt from state/local tax. But if you buy T-Note or T-Bond and sell before maturity in the secondary market (you cannot do this at Treasury Direct, so you would have to first transfer them to brokerage), that may have capital gain or loss (ST or LT) and would be treated as such (ST-CG or LT-CG). It won't be considered "Treasury interest exempt from local/state taxes". This tax treatment is similar to that for other bonds - munis, corps, held by individuals or funds. www.businessinsider.com/personal-finance/how-bonds-are-taxed Thanks for the message. I asked a fido rep if I bought a treasury bill at auction with $980 and sold for $990 before its maturity, whether the $10 gain is interests or capital gain. He asked me what type of treasury it is? I said it was 3 or 6 month bill. He then said it all counted as interests. |
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Post by django on Oct 23, 2023 23:18:48 GMT
Perhaps the Fido rep meant to say a short term capital gain (the only capital gain possible for a 3 to 6 month T-Bill) is taxed the same as interest. It's taxed at your regular income tax rate.
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Post by yogibearbull on Oct 23, 2023 23:19:12 GMT
teapot , thanks for the clarification. BTW, 99.6665% of USFR income in 2022 was from Treasury holdings*. It holds Treasury FRNs, not T-Bills. A T-Bill holding ETF is BIL and in 2022, 99.2428% of its income was from Treasury holdings*. *So, exempt from state/local taxes. big-bang-investors.proboards.com/post/41025/thread
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