Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
931230
XXXXXXXXXX Michael Cooke
(613) 957-9796
May 3, 1993
Dear XXXXXXXXXX
Re: Calculation of Interest on Strip Bonds
This is in reply to your letter of March 4, 1993, to the Director of Technical Publications concerning the calculation of interest under Regulation 7000 (the "Regulations") of the Income Tax Act (the "Act") in respect of strip bond coupons. As requested, we enclose a copy of Regulation 7000. We have also enclosed a copy of the 1982 Explanatory Notes for the Regulations which provides an example calculation of the deemed interest for strip coupons; paragraph 7000(2)(b).
For taxation years commencing after 1981, strip coupons are debt instruments described in paragraph 7000(1)(b) of the Regulations. Accordingly, interest income is deemed to accrue on such instruments as prescribed in paragraph 7000(2)(b) of the Regulations, which requires the determination of a specified interest rate using assumptions concerning the interest rate and compounding period that will result in a present value, at the time of acquisition, of the maturity value equal to the cost of that interest to the taxpayer, applicable for all periods up to the time of disposition.
Since the calculation of the deemed interest on a strip coupon depends on a number of factors known only to the purchaser (ie: the purchase cost of the strip coupon, its purchase date and maturity date) it is not possible for the Department to provide an interest calculation without this information.
We trust that the above will be of assistance to you, however if you require additional assistance with respect to your particular situation, please contact the writer.
Yours truly,
for Director Financial Industries Division Rulings Directorate
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