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Confusion Over Bonds

December 29, 1985

"Drawback to Owning Bearer Bonds" (Money Talk, Nov. 7) would have us believe the usual Internal Revenue Service propaganda that Congress outlawed the tax-free aspects of bearer-bonds in order to eliminate the problem of locating the bondholders on the part of the bond issuers. That is not true.

Congress' intent was for the IRS, not the issuers, to be able to locate the bondholders, and the easiest way to accomplish this was to require that tax-free municipals must be registered bonds.

The IRS is concerned that the purchasers of coupon bonds may not be the ultimate owners of them and/or that they can avoid being included in a decedent's estate.

In order to locate the owners of the currently outstanding multi-billions of bearer bonds, the IRS now requires that those depositing their coupons must furnish their name, address and Social Security number to their bank at the time of each deposit. Said information then becomes instantly available to the IRS.

The column also misleads us in the case of bearer bonds that have been called without their owners' being aware of the call-in. This is not a serious problem and the bonds are not rendered worthless.

On the next coupon-clipping date the owner will be informed that his bond has been called, and he then can submit it for payment. The most he'll lose is a few months interest.


Beverly Hills

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