Not too off-topic, Treasuries fit here as well as commercial bonds.

The tax aspect, though, might get more informed answers over on the Tax Strategies board.

My non-tax expert (and one who doesn't invest in Treasuries of any sort) stab goes something like this: it depends.

Your OID accumulates its recouped value daily, so that (to keep the arithmetic simple, and assuming an ideal world) were you to buy a 90-day $1000 OID issue for $910, after 30 days, its value would be $940. Were you to sell it then, the taxable amount would depend on whether you sold for more or less than those $940. The amount by which more or less likely would be a capital gain or loss, taxable IAW your State's tax law.

Hopefully, an actual expert will chime in and corroborate or disabuse me.

Eric Hines

Bond Investing FAQ

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