De Minimis Tax Rule

The De Minimis tax rule states a price threshold to determine whether a discount bond should be taxed as capital gain or ordinary income. It states that if a discount is less than a quarter-point per full year between the time of acquisition and maturity, then it is too small to be considered a market discount for tax purposes. Instead, the accretion from the purchase price to the par value should be treated as a capital gain, if held for greater than one year.