Question

In 2017 Taxpayer, the owner of negotiable bonds, detached from them negotiable interest coupons shortly before their due date and delivered them as a gift to Taxpayer’s son who in the same year collected them at maturity.

Should Taxpayer be taxed on the interest or should Son?

Answer 1

Ans:

A tapayer, owner of a negotiable bond, dispatched the negotiable interest coupons before they are due to his son. The interest on these bonds should be taxed with the taxpayer. One can not save himself from tax by diverting the earned income with relatives. The income earned on the bonds is earned by the taxpayer. The income in not earned by the son as he just collected the interest which was already due when he received the gift.

So in such case, Taxpayer should be taxed on interest earned.

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