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Found 1 result

  1. We have certificates of deposit at a Costa Rican cooperative. When the CDs were issued, the cooperative also issued a "coupon" for the interest they would accrue, but those coupons are only redeemable at the time the CDs mature. The interest is not paid or compounded during the duration of the term of the CDs. The CDs were purchased with funds which had already been taxed by IRS, so when the CDs mature, the principal will not be taxable again. I understand, of course, that the interest earned normally would be taxable, but what if we roll that interest over into a new CD without ever withdrawing it? Suppose we'd invested (say) $1,000 at 10% per annum for five years. Our interest earning would be $500 and that would normally be taxable. But what if on the date the CD matured we bought a new $500 CD with that interest without it ever passing through our hands? Would the maturation of the coupon be a taxable event even if we reinvested the interest immediately? Thanks in advance.
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