To close the loop, yes there is a minimum IR for a CD. Similar to the max rate, the min rates are posted monthly by the IRS. Here is a link to the most recent published minimum rates – “Applicable Federal Rates” (April 2011)
The idea of the minimum IR is to ensure you pay taxes on the transaction vs. add the IR to your sale price for a higher sale price. If you pursue a CD claiming no IR the IRS will apply the AFR to your transaction for tax purposes.
When you are considering a CD – whether buying or selling it is useful to put all the moving pieces together and compare. A basic Mortgage Amortization template in excel will be a necessary input.
Here is a grid that I recently created and used:
Interest Rate (enter into Mortgage Amortization template)
Loan amount (SP – Downpayment, enter into Mortgage Amort template)
Sum of payments (multiply monthly payment (from morg amort template) * total months)
Payoff (from mortgage amortization template)
Net (Downpayment+total payments + Payoff)
Each column can list a different scenario. You can color code offers and examine the differences. Some people will prefer a higher downpayment for others a strong interest rate is a deciding factor.
Excel has a variety of free templates under the search “Mortgage Amortization”
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