Tax Law (Questions About Taxes)/Forms 3520 and 3520A

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Question
I am a U.S. citizen living in Canada. I hold GIC's in my Canadian Tax Free Savings Account and must submit these forms now.  I am wondering about reporting the accrued interest in 2012.  In Canada accrued interest is not reported, only paid interest. The GIC's mature in 2013.  Thanks.

Answer
Dear Kathy,

GIC are guaranteed obligations similar to bonds. Therefore, accrued interest must be reported according to reporting rules for accrued bond interest, particularly in either of the following ways:

1. Method 1. Postpone reporting the interest
until the earlier of the year you cash or dispose of the bonds or the year in which they mature.

2. Method 2. Choose to report the increase in redemption value as interest each year.

You must use the same method each year.

See http://www.irs.gov/pub/irs-pdf/p550.pdf

Hope this helps
I.J.Zemelman

Tax Law (Questions About Taxes)

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IJ Zemelman, EA MBA

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I am an IRS-authorized EA and principal of a Tax Preparation firm focusing on U.S. Expatriates. We specialize in all tax issues faced by American citizens living abroad - such as foreign earned income, tax treaties, foreign spouse, etc. Visit our website - www.TaxesForExpats.com - for more information.

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18 years professional tax experience, 12 with expatriate taxes.

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Expatriate tax information on www.TaxesForExpats.com

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MBA from Zicklin School Of Business, IRS Enrolled Agent

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