Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Thank you all for your kind replies. I found them very informative.

In my experience with preferred stocks, most are issued at $25/share. Depending on market conditions, the interest rate environment, corporate financial condition, etc., they can trade at a premium or discount to the issue price. If you buy a bond on the open market at a discount to its $1000 par value issue price (for say $900), the bond will ultimately mature at $1000 or could be called for $1000. That $100 "appreciation" is treated as interest not capital gain in bond tax accounting. My question would be do those bond tax rules (i.e. accrued market discount or amortization of bond premium etc.) apply to other income instruments like a preferred stock.
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.