The benefits offered by the Treasury Bond to Peter are: (i) income not subject to DIRT; (ii) loss on sale offsettable for capital gains tax; (iii) gain on sale liable to a reduced capital gains tax rate of 20%. Which statements are true?

• A. (i) only.
• B. (ii) only.
• C. (i) and (ii) only.
• D. (ii) and (iii) only.

Answer: (A)

DIRT and capital gains treatment for government bonds differ from ordinary deposit income. The key idea is that Irish Government Bonds carry tax exemptions that most ordinary savings don’t have.

Interest from a Treasury Bond is not subject to DIRT, so Peter’s bond interest would escape DIRT withholding. That makes the first statement true.

When it comes to selling the bond, gains on disposal of Irish Government Bonds are not taxed under capital gains tax. There isn’t a CGT liability at the standard rates (and there isn’t a reduced 20% CGT rate applying to such gains). Because there’s no CGT on these gains, the idea of offsetting a loss against CGT doesn’t apply, and the notion of a reduced CGT rate on a gain isn’t relevant for this instrument. That’s why the other two statements aren’t true.