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Posted by Route 101© on February 28, 2007, 12:39 am
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Assuming you purchased the bond(s) and received the OID (i.e., you bought
part of a the new issue), I agree about the taxes. However, many people buy
bonds on the secondary market at par or above, but also receive an annual
1099-OID -- it travels from owner to owner with the bonds; these people may
adjust out (subtract) the amount of OID after reporting in on Schedule B.
Another reason (besides 1099-Bs) to keep all original records/confirms as
long as you own a security.
..............................
They also serve who only point and laugh.
> As tax time draws near, a reminder on dealiing with Original Issue
> Discount. This is imputed interest you don't receive, but have to pay
> tax on anyway. It occurs with zero coupon bonds, inflation-adjusted
> Treasuries, etc.
>
> If you receive a 1099-OID form, you have OID.
>
> Paying the tax is automatic. But you should increase the basis of the
> security by the amount of OID so you don't pay capital gains on the
> same amount when you sell it.
>
> I handle this by entering two transactions into Quicken:
>
> Interest income from the security for the OID amount.
> Return of capital from the security for MINUS the OID amount.
>
> This results in no net cash change in the account, but increases the
> basis by the OID amount.
>
> - Walt Bilofsky
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