F.B. Fontaine (613) 957-2140
JAN 5 1988
Dear XXXX
Re: Canada Savings Bonds
This is in reply to your letter dated October 2, 1987.
Our understanding of the situation is that Canada Savings Bonds (Series 26) were issued with interest coupons as well as bonus coupons attached. The bonus is payable only if the Bonds are held for a specific period of time. The Bonds, together with the bonus coupons, were cashed in 1987. You ask whether half of the bonus should be taxed as interest and the balance as a capital gain.
A taxpayer who has received a cash bonus on maturity of Canada Savings Bonds after 1984 will be required to include one-half of that amount as interest in computing his income in the year the cash bonus is so received. The remaining one-half is not to be included in computing his income.
We trust that this is the information you require.
Yours truly.
ORIGINAL SIGNED BY
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch