Purchasing iBond after entering the account

gksmith5

I added an iBond account per instructions found on this board. It shows in my security list. But I cannot find how to actually record the purchase. The iBond account does not show in any other list nor can I access the account when trying to record the purchase from my checking account. What am I doing incorrectly?

Jim_Harman

Oh, your account is set up for Simple investing mode.

Click on the gear at the top right of the account then select Edit account details. Under Tracking method, select Complete then click on OK. Then you can click on the Enter Transactions button and buy the I bond as described above.

Jim_Harman

It sounds like you added an I bond security but did not create an investing account to hold it. Please follow these instructions:

To track an I bond, you can set up an off-line Brokerage type investing account to hold all your I bonds.

To do this, go to Tools > Add account. At the bottom, select Offline account then Brokerage and follow the instructions. You can call the account "Treasury Direct" or whatever you like. Do not add any securities to the account. 

Then go to Tools > Security List and click on Add security to create a Security for the bond. Click on the link at the bottom to enter the name manually. Leave the Ticker Symbol blank and give the bond a descriptive name like IBond 2052-08-31. Set the Security type to Other. The Bond type is for negotiable bonds, which does not apply to I bonds.

Usually people defer I bond interest until they redeem the bond. The bond's value is increasing year by year and thus should be reflected in your net worth, but the increase should not show as taxable income.  

In this case, go to the account you created and enter a Buy (not Bonds bought) for one “share” at the amount you paid for the bond. If you receive the bond as a gift, you would enter an Add instead.

As interest accrues and the I bond’s value increases over the years, you can increase the bond's "share" price to match its current value. Then when you redeem the bond, you would lower its price back to the purchase price and record an Int payment for the total interest, then record the sale. That should make Quicken's net worth and tax calculations correct.

If you choose to pay taxes as you go, you would buy as many shares of the security you created as the amount you paid for the bond at a price of $1.00. When the bond pays interest, you record it as a ReinvInt transaction.

gksmith5

I discovered part of my problem in that I had not set up an off-line brokerage investing account. After doing that I was able to make my purchase to my Treasury Direct "broker". But nothing shows in my iBond security. So I am still missing something.

Jim_Harman

You must transfer cash that you sent to Treasury Direct into the account and then buy the bond. 

gksmith5

I have transferred the cash to Treasury Direct, but I cannot find the way to purchase the bond. The iBond shows in my list of securities, but I cannot find the method to make the purchase. I've looked in the menus and have right clicked on the security, but do not seen anything regarding purchasing. I am assuming I need to purchase the iBond from Treasury Direct, just as I purchase something from a checking account. But I do not have a register to do this from. I only get a performance view of my Treasury Direct account and cannot find a way to change to register view to make the transaction. I have tried theInvestment Preferences menu from the setup button, and see an option for the register and tried a change there, but still no register. I am missing something.

Jim_Harman

Oh, your account is set up for Simple investing mode.

Click on the gear at the top right of the account then select Edit account details. Under Tracking method, select Complete then click on OK. Then you can click on the Enter Transactions button and buy the I bond as described above.

gksmith5

That did the trick. Everyting looks familiar now. Thank you for your patience and help!

mtbdog

Jim Harmon: I'm recording interest accruals in a slightly different way, which may be a little more work but makes more sense to my accountant-addled brain.

I record the monthly interest for each bond with a "reinvest interest" transaction. There is, unfortunately, a 5-month lag from the date interest is actually earned, which is the month of purchase, and when it is credited. So, I keep a spreadsheet that shows the real value of the iBond and reconciles to the value in Quicken. (The assumption is that I will hold it for five years and won't incur the last-three-months-of-interest penalty.)

However, the reinvest-interest obviously creates taxable income and messes up my tax projections. So, I created a liability account called Deferred iBond Interest Income. There I make an entry to reverse the investment interest income each month when I record the accrual. That fixes the taxable income problem. The liability account shows the total amount of deferred interest income, so no need to do a computation if I happen to be wondering that number is.

Whenever I someday sell a bond the proceeds of the sale won't produce income in Quicken because what I receive will be the same as basis in Quicken. So, I'll record the investment interest income in the Deferred iBond Interest Income liability account in the amount of the selling price less the cost.

I have 4 iBond accounts, by the way: me, wife, son and trust. We have purchased two iBonds each so far. (Will add many more, hopefully.) I set up a corresponding deferred income liability account for each iBond account, which will make it easier to reconcile whenever the sales happen.

A bit more work, as I said, but I'll have numbers that are easy to understand (for me, anyway).