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Tax Forms For College Students

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Tax Forms For College Students

Tax forms for college students Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. Tax forms for college students Adjustment for premium. Tax forms for college students Adjustment for acquisition premium. Tax forms for college students Adjustment for market discount. Tax forms for college students Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. Tax forms for college students “Original issue discount” is defined first. Tax forms for college students The other terms are listed alphabetically. Tax forms for college students Original issue discount (OID). Tax forms for college students   OID is a form of interest. Tax forms for college students It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). Tax forms for college students Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. Tax forms for college students Accrual period. Tax forms for college students   An accrual period is an interval of time used to measure OID. Tax forms for college students The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. Tax forms for college students Acquisition premium. Tax forms for college students   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. Tax forms for college students A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. Tax forms for college students See Premium, later. Tax forms for college students Adjusted issue price. Tax forms for college students   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. Tax forms for college students In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. Tax forms for college students The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. Tax forms for college students Debt instrument. Tax forms for college students   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). Tax forms for college students It generally does not include an annuity contract. Tax forms for college students Issue price. Tax forms for college students   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. Tax forms for college students Market discount. Tax forms for college students   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. Tax forms for college students An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. Tax forms for college students The market discount is the difference between the issue price plus accrued OID and your adjusted basis. Tax forms for college students Premium. Tax forms for college students   A debt instrument is purchased at a premium if its adjusted basis immediately after purchase is greater than the total of all amounts payable on the debt instrument after the purchase date, other than qualified stated interest. Tax forms for college students The premium is the excess of the adjusted basis over the payable amounts. Tax forms for college students See Publication 550 for information on the tax treatment of bond premium. Tax forms for college students Qualified stated interest. Tax forms for college students   In general, qualified stated interest is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually over the term of the debt instrument at a single fixed rate. Tax forms for college students Stated redemption price at maturity. Tax forms for college students   A debt instrument's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on the debt instrument other than qualified stated interest. Tax forms for college students Yield to maturity (YTM). Tax forms for college students   In general, the YTM is the discount rate that, when used in figuring the present value of all principal and interest payments, produces an amount equal to the issue price of the debt instrument. Tax forms for college students The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. Tax forms for college students If you do not have this information, consult your broker, tax advisor, or the issuer. Tax forms for college students Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. Tax forms for college students If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. Tax forms for college students The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. Tax forms for college students For information about determining the OID to be reported on your tax return, see the instructions for figuring OID under Information for Owners of OID Debt Instruments, later. Tax forms for college students The following discussions explain what information is contained in each section of the list. Tax forms for college students Section I. Tax forms for college students   This section contains publicly offered, long-term debt instruments. Tax forms for college students Section I-A: Corporate Debt Instruments Issued Before 1985. Tax forms for college students Section I-B: Corporate Debt Instruments Issued After 1984. Tax forms for college students Section I-C: Inflation-Indexed Debt Instruments. Tax forms for college students For each publicly offered debt instrument in Section I, the list contains the following information. Tax forms for college students The name of the issuer. Tax forms for college students The Committee on Uniform Security Identification Procedures (CUSIP) number. Tax forms for college students The issue date. Tax forms for college students The maturity date. Tax forms for college students The issue price expressed as a percent of principal or of stated redemption price at maturity. Tax forms for college students The annual stated or coupon interest rate. Tax forms for college students (This rate is shown as 0. Tax forms for college students 00 if no annual interest payments are provided. Tax forms for college students ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. Tax forms for college students The total OID accrued up to January 1 of a calendar year. Tax forms for college students (This information is not available for every instrument. Tax forms for college students ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. Tax forms for college students The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. Tax forms for college students Section II. Tax forms for college students   This section contains stripped coupons and principal components of U. Tax forms for college students S. Tax forms for college students Treasury and Government-Sponsored Enterprise debt instruments. Tax forms for college students These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. Tax forms for college students This section also includes debt instruments backed by U. Tax forms for college students S. Tax forms for college students Treasury securities that represent ownership interests in those securities. Tax forms for college students   The obligations listed in Section II are arranged by maturity date. Tax forms for college students The amounts listed are the total OID for a calendar year per $1,000 of redemption price. Tax forms for college students Section III. Tax forms for college students   This section contains short-term discount obligations. Tax forms for college students Section III-A: Short-Term U. Tax forms for college students S. Tax forms for college students Treasury Bills. Tax forms for college students Section III-B: Federal Home Loan Banks. Tax forms for college students Section III-C: Federal National Mortgage Association. Tax forms for college students Section III-D: Federal Farm Credit Banks. Tax forms for college students Section III-E: Federal Home Loan Mortgage Corporation. Tax forms for college students Section III-F: Federal Agricultural Mortgage Corporation. Tax forms for college students    Information that supplements Section III-A is available on the Internet at http://www. Tax forms for college students treasurydirect. Tax forms for college students gov/tdhome. Tax forms for college students htm. Tax forms for college students   The short-term obligations listed in this section are arranged by maturity date. Tax forms for college students For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. Tax forms for college students Brokers and other middlemen should rely on the issue price information in Section III only if they are unable to determine the price actually paid by the owner. Tax forms for college students Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. Tax forms for college students U. Tax forms for college students S. Tax forms for college students savings bonds. Tax forms for college students Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. Tax forms for college students Obligations issued by tax-exempt organizations. Tax forms for college students OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. Tax forms for college students Mortgage-backed securities and mortgage participation certificates. Tax forms for college students Long-term OID debt instruments issued before May 28, 1969. Tax forms for college students Short-term obligations, other than the obligations listed in Section III. Tax forms for college students Debt instruments issued at a discount by states or their political subdivisions. Tax forms for college students REMIC regular interests and CDOs. Tax forms for college students Commercial paper and banker's acceptances issued at a discount. Tax forms for college students Obligations issued at a discount by individuals. Tax forms for college students Foreign obligations not traded in the United States and obligations not issued in the United States. Tax forms for college students Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. Tax forms for college students In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. Tax forms for college students You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. Tax forms for college students See Backup Withholding, later. Tax forms for college students If you must file a Form 1099, furnish a copy to the owner of the debt instrument by January 31 in the year it is due. Tax forms for college students File all your Forms 1099 with the IRS, accompanied by Form 1096, by February 28 in the year it is due (March 31 if you file electronically). Tax forms for college students Electronic payee statements. Tax forms for college students   You can issue Form 1099-OID electronically with the consent of the recipient. Tax forms for college students More information. Tax forms for college students   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. Tax forms for college students Short-Term Obligations Redeemed at Maturity If you redeem a short-term discount obligation for the owner at maturity, you must report the discount as interest on Form 1099-INT. Tax forms for college students To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. Tax forms for college students If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. Tax forms for college students Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. Tax forms for college students If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. Tax forms for college students A special rule is used to determine the original issue price for information reporting on U. Tax forms for college students S. Tax forms for college students Treasury bills (T-bills) listed in Section III-A. Tax forms for college students Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. Tax forms for college students This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. Tax forms for college students A similar rule is used to figure the discount on short-term discount obligations issued by the organizations listed in Section III-B through Section III-F. Tax forms for college students Example 1. Tax forms for college students There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. Tax forms for college students The price actually paid by the owner cannot be established by owner or middleman records. Tax forms for college students You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. Tax forms for college students The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. Tax forms for college students Long-Term Debt Instruments If you hold a long-term OID debt instrument as a nominee for the true owner, you generally must file Form 1099-OID. Tax forms for college students For this purpose, you can rely on Section I of the OID list to determine the following information. Tax forms for college students Whether a debt instrument has OID. Tax forms for college students The OID to be reported on the Form 1099-OID. Tax forms for college students In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. Tax forms for college students You also can report OID on other long-term debt instruments. Tax forms for college students Form 1099-OID. Tax forms for college students   On Form 1099-OID for a calendar year show the following information. Tax forms for college students Box 1. Tax forms for college students The OID for the actual dates the owner held the debt instruments during a calendar year. Tax forms for college students To determine this amount, see Figuring OID, next. Tax forms for college students Box 2. Tax forms for college students The qualified stated interest paid or credited during the calendar year. Tax forms for college students Interest reported here is not reported on Form 1099-INT. Tax forms for college students The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. Tax forms for college students Box 3. Tax forms for college students Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. Tax forms for college students Do not reduce the amounts in boxes 1 and 2 by the forfeiture. Tax forms for college students Box 4. Tax forms for college students Any backup withholding for this debt instrument. Tax forms for college students Box 7. Tax forms for college students The CUSIP number, if any. Tax forms for college students If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. Tax forms for college students 50 2006). Tax forms for college students If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. Tax forms for college students Box 8. Tax forms for college students The OID on a U. Tax forms for college students S. Tax forms for college students Treasury obligation for the part of the year the owner held the debt instrument. Tax forms for college students Box 9. Tax forms for college students Investment expenses passed on to holders of a single-class REMIC. Tax forms for college students Boxes 10-12. Tax forms for college students Use to report any state income tax withheld for this debt instrument. Tax forms for college students Figuring OID. Tax forms for college students   You can determine the OID on a long-term debt instrument by using either of the following. Tax forms for college students Section I of the OID list. Tax forms for college students The income tax regulations. Tax forms for college students Using Section I. Tax forms for college students   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. Tax forms for college students Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. Tax forms for college students For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. Tax forms for college students   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. Tax forms for college students Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. Tax forms for college students Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. Tax forms for college students Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. Tax forms for college students Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. Tax forms for college students If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. Tax forms for college students Report the result on Form 1099-OID in box 1. Tax forms for college students Using the income tax regulations. Tax forms for college students   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. Tax forms for college students For example, under the regulations, you can use monthly accrual periods in figuring OID for a debt instrument issued after April 3, 1994, that provides for monthly payments. Tax forms for college students (If you use Section I-B, the OID is figured using 6-month accrual periods. Tax forms for college students )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. Tax forms for college students Certificates of Deposit If you hold a bank certificate of deposit (CD) as a nominee, you must determine whether the CD has OID and any OID includible in the income of the owner. Tax forms for college students You must file an information return showing the reportable interest and OID, if any, on the CD. Tax forms for college students These rules apply whether or not you sold the CD to the owner. Tax forms for college students Report OID on a CD in the same way as OID on other debt instruments. Tax forms for college students See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. Tax forms for college students Bearer Bonds and Coupons If a coupon from a bearer bond is presented to you for collection before the bond matures, you generally must report the interest on Form 1099-INT. Tax forms for college students However, do not report the interest if either of the following apply. Tax forms for college students You hold the bond as a nominee for the true owner. Tax forms for college students The payee is a foreign person. Tax forms for college students See Payments to foreign person under Backup Withholding, later. Tax forms for college students Because you cannot assume the presenter of the coupon also owns the bond, you should not report OID on the bond on Form 1099-OID. Tax forms for college students The coupon may have been “stripped” (separated) from the bond and separately purchased. Tax forms for college students However, if a long-term bearer bond on the OID list is presented to you for redemption upon call or maturity, you should prepare a Form 1099-OID showing the OID for that calendar year, as well as any coupon interest payments collected at the time of redemption. Tax forms for college students Backup Withholding If you report OID on Form 1099-OID or interest on Form 1099-INT for a calendar year, you may be required to apply backup withholding to the reportable payment at a rate of 28%. Tax forms for college students The backup withholding is deducted at the time a cash payment is made. Tax forms for college students See Pub. Tax forms for college students 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. Tax forms for college students Backup withholding generally applies in the following situations. Tax forms for college students The payee does not give you a taxpayer identification number (TIN). Tax forms for college students The IRS notifies you that the payee gave an incorrect TIN. Tax forms for college students The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. Tax forms for college students For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. Tax forms for college students However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. Tax forms for college students S. Tax forms for college students savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. Tax forms for college students Short-term obligations. Tax forms for college students   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. Tax forms for college students However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. Tax forms for college students   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. Tax forms for college students However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. Tax forms for college students If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. Tax forms for college students Long-term obligations. Tax forms for college students   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. Tax forms for college students The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. Tax forms for college students The amount to be withheld is limited to the cash paid. Tax forms for college students Registered long-term obligations with cash payments. Tax forms for college students   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. Tax forms for college students The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. Tax forms for college students If more than one cash payment is made during the year, the OID subject to withholding for the year must be allocated among the expected cash payments in the ratio that each bears to the total of the expected cash payments. Tax forms for college students For any payment, the required withholding is limited to the cash paid. Tax forms for college students Payee not the original owner. Tax forms for college students   If the payee is not the original owner of the obligation, the OID subject to backup withholding is the OID includible in the gross income of all owners during the calendar year (without regard to any amount paid by the new owner at the time of transfer). Tax forms for college students The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. Tax forms for college students Bearer long-term obligations with cash payments. Tax forms for college students   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. Tax forms for college students For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. Tax forms for college students For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. Tax forms for college students The required withholding at maturity is limited to the cash paid. Tax forms for college students Sales and redemptions. Tax forms for college students   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. Tax forms for college students Backup withholding applies in the following situations. Tax forms for college students The payee does not give you a TIN. Tax forms for college students The IRS notifies you that the payee gave an incorrect TIN. Tax forms for college students For debt instruments held in an account opened after 1983, the payee does not certify, under penalties of perjury, that the TIN given is correct. Tax forms for college students Payments outside the United States to U. Tax forms for college students S. Tax forms for college students person. Tax forms for college students   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. Tax forms for college students S. Tax forms for college students person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. Tax forms for college students S. Tax forms for college students trade or business. Tax forms for college students Payments to foreign person. Tax forms for college students   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. Tax forms for college students U. Tax forms for college students S. Tax forms for college students -source amount. Tax forms for college students   Backup withholding and information reporting are not required for payments of U. Tax forms for college students S. Tax forms for college students -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. Tax forms for college students A U. Tax forms for college students S. Tax forms for college students resident is not a foreign person. Tax forms for college students For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. Tax forms for college students Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. Tax forms for college students S. Tax forms for college students person. Tax forms for college students   For information about the 28% withholding tax that may apply to payments of U. Tax forms for college students S. Tax forms for college students -source OID or interest to foreign persons, see Publication 515. Tax forms for college students Foreign-source amount. Tax forms for college students   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. Tax forms for college students However, if the payments are made inside the United States, the requirements for backup withholding and information reporting will apply unless the payee has given you the appropriate Form W-8 or acceptable substitute as proof that the payee is a foreign person. Tax forms for college students More information. Tax forms for college students   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. Tax forms for college students 6049-5. Tax forms for college students Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. Tax forms for college students It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. Tax forms for college students It also includes a similar discussion for stripped bonds and coupons, such as zero coupon bonds available through the Department of the Treasury's STRIPS program and government-sponsored enterprises such as the Resolution Funding Corporation. Tax forms for college students However, the information provided does not cover every situation. Tax forms for college students More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. Tax forms for college students Including OID in income. Tax forms for college students   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. Tax forms for college students Exceptions. Tax forms for college students   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. Tax forms for college students U. Tax forms for college students S. Tax forms for college students savings bonds. Tax forms for college students Tax-exempt obligations. Tax forms for college students (However, see Tax-Exempt Bonds and Coupons, later. Tax forms for college students ) Obligations issued by individuals before March 2, 1984. Tax forms for college students Loans of $10,000 or less between individuals who are not in the business of lending money. Tax forms for college students (The dollar limit includes outstanding prior loans by the lender to the borrower. Tax forms for college students ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. Tax forms for college students   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. Tax forms for college students Publication 550 also discusses rules for holders of REMIC interests and CDOs. Tax forms for college students De minimis rule. Tax forms for college students   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. Tax forms for college students 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Tax forms for college students Debt instruments with de minimis OID are not listed in this publication. Tax forms for college students There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. Tax forms for college students Also, the de minimis rules generally do not apply to tax-exempt obligations. Tax forms for college students Example 2. Tax forms for college students You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Tax forms for college students One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Tax forms for college students Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. Tax forms for college students Example 3. Tax forms for college students Assume the same facts as Example 2, except the debt instrument was issued at $950. Tax forms for college students You must report part of the $50 OID each year because it is more than $25. Tax forms for college students Choice to report all interest as OID. Tax forms for college students   Generally, you can choose to treat all interest on a debt instrument acquired after April 3, 1994, as OID and include it in gross income by using the constant yield method. Tax forms for college students See Constant yield method under Debt Instruments Issued After 1984, later, for more information. Tax forms for college students   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. Tax forms for college students For more information, see Regulations section 1. Tax forms for college students 1272-3. Tax forms for college students Purchase after date of original issue. Tax forms for college students   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. Tax forms for college students If so, the OID reported to you on Form 1099-OID may have to be adjusted. Tax forms for college students For more information, see Showing an OID adjustment under How To Report OID, later. Tax forms for college students The following rules generally do not apply to contingent payment debt instruments. Tax forms for college students Adjustment for premium. Tax forms for college students   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. Tax forms for college students Your adjustment is the total OID shown on your Form 1099-OID. Tax forms for college students Adjustment for acquisition premium. Tax forms for college students   If your debt instrument has acquisition premium, reduce the OID you report. Tax forms for college students Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments. Tax forms for college students Adjustment for market discount. Tax forms for college students   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. Tax forms for college students Your adjustment is the accrued market discount for the year. Tax forms for college students See Market Discount Bonds in chapter 1 of Publication 550 for information on how to figure accrued market discount and include it in your income currently and for other information about market discount bonds. Tax forms for college students If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. Tax forms for college students The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. Tax forms for college students For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. Tax forms for college students 1275-7. Tax forms for college students Sale, exchange, or redemption. Tax forms for college students   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. Tax forms for college students If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. Tax forms for college students Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). Tax forms for college students   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. Tax forms for college students Your basis, generally, is your cost increased by the OID you have included in income each year you held it. Tax forms for college students In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Tax forms for college students   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. Tax forms for college students Example 4. Tax forms for college students Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. Tax forms for college students 00 on November 1 of Year 1. Tax forms for college students The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. Tax forms for college students The debt instrument provides for semiannual payments of interest at 10%. Tax forms for college students Assume the debt instrument is a capital asset in Larry's hands. Tax forms for college students The debt instrument has $13,765. Tax forms for college students 00 of OID ($100,000 stated redemption price at maturity minus $86,235. Tax forms for college students 00 issue price). Tax forms for college students Larry sold the debt instrument for $90,000 on November 1 of Year 4. Tax forms for college students Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. Tax forms for college students 00 of OID in income and has increased his basis by that amount to $90,791. Tax forms for college students 00. Tax forms for college students Larry has realized a loss of $791. Tax forms for college students 00. Tax forms for college students All of Larry's loss is capital loss. Tax forms for college students Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument through a broker) should give you a copy of Form 1099-OID or a similar statement if the accrued OID for the calendar year is $10 or more and the term of the debt instrument is more than 1 year. Tax forms for college students Form 1099-OID shows all OID income in box 1 except OID on a U. Tax forms for college students S. Tax forms for college students Treasury obligation, which is shown in box 8. Tax forms for college students It also shows, in box 2, any qualified stated interest you must include in income. Tax forms for college students (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. Tax forms for college students ) A copy of Form 1099-OID will be sent to the IRS. Tax forms for college students Do not attach your copy to your tax return. Tax forms for college students Keep it for your records. Tax forms for college students If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. Tax forms for college students A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. Tax forms for college students Form 1099-OID not received. Tax forms for college students   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. Tax forms for college students Refiguring OID. Tax forms for college students   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. Tax forms for college students You bought the debt instrument at a premium or at an acquisition premium. Tax forms for college students The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. Tax forms for college students S. Tax forms for college students Treasury securities). Tax forms for college students The debt instrument is a contingent payment or inflation-indexed debt instrument. Tax forms for college students See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. Tax forms for college students Refiguring interest. Tax forms for college students   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under Bonds Sold Between Interest Dates in chapter 1 of Publication 550 for information about refiguring the interest shown on Form 1099-OID in box 2. Tax forms for college students Nominee. Tax forms for college students   If you are the holder of an OID debt instrument and you receive a Form 1099-OID that shows your taxpayer identification number and includes amounts belonging to another person, you are considered a “nominee. Tax forms for college students ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. Tax forms for college students Show the owner of the debt instrument as the “recipient” and you as the “payer. Tax forms for college students ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. Tax forms for college students You must also give a copy of the Form 1099-OID to the actual owner. Tax forms for college students However, you are not required to file a nominee return to show amounts belonging to your spouse. Tax forms for college students See the Form 1099 instructions for more information. Tax forms for college students   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. Tax forms for college students How To Report OID Generally, you report your taxable interest and OID income on the interest line of Form 1040EZ, Form 1040A, or Form 1040. Tax forms for college students Form 1040 or Form 1040A required. Tax forms for college students   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. Tax forms for college students You received a Form 1099-OID as a nominee for the actual owner. Tax forms for college students Your total interest and OID income for the year was more than $1,500. Tax forms for college students Form 1040 required. Tax forms for college students   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. Tax forms for college students For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. Tax forms for college students Also, you must use Form 1040 if you were charged an early withdrawal penalty. Tax forms for college students Where to report. Tax forms for college students   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. Tax forms for college students Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. Tax forms for college students Also include any other OID and interest income for which you did not receive a Form 1099. Tax forms for college students Showing an OID adjustment. Tax forms for college students   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. Tax forms for college students   If you use Form 1040A to report the OID shown on a Form 1099-OID you received as a nominee for the actual owner, list the full OID on Schedule B, Part I, line 1 and follow the instructions under 1. Tax forms for college students If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. Tax forms for college students Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Tax forms for college students Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. Tax forms for college students Subtract that OID from the subtotal and enter the result on line 2. Tax forms for college students If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. Tax forms for college students Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Tax forms for college students Below the subtotal, write “OID Adjustment” and show the additional OID. Tax forms for college students Add that OID to the subtotal and enter the result on line 2. Tax forms for college students Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. Tax forms for college students It also may depend on the type of the debt instrument. Tax forms for college students There are different rules for each of the following debt instruments. Tax forms for college students Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. Tax forms for college students Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. Tax forms for college students Debt instruments issued after July 1, 1982, and before 1985. Tax forms for college students Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). Tax forms for college students Contingent payment debt instruments issued after August 12, 1996. Tax forms for college students Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. Tax forms for college students Zero coupon bonds. Tax forms for college students   The rules for figuring OID on zero coupon bonds backed by U. Tax forms for college students S. Tax forms for college students Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. Tax forms for college students Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. Tax forms for college students The OID, which is taxed as ordinary income, generally equals the following amount. Tax forms for college students   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. Tax forms for college students If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. Tax forms for college students Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. Tax forms for college students For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. Tax forms for college students Your basis in the debt instrument is increased by the OID you include in income. Tax forms for college students Form 1099-OID. Tax forms for college students   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Tax forms for college students However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Tax forms for college students See Reduction for acquisition premium, later. Tax forms for college students If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Tax forms for college students irs. Tax forms for college students gov/pub1212 by clicking the link under Recent Developments. Tax forms for college students Form 1099-OID not received. Tax forms for college students    The OID listed is for each $1,000 of redemption price. Tax forms for college students You must adjust the listed amount if your debt instrument has a different principal amount. Tax forms for college students For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Tax forms for college students   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. Tax forms for college students (If your debt instrument is not listed in Section I-A, consult the issuer for information about the issue price and the OID that accrued for that year. Tax forms for college students ) If you did not hold the debt instrument the entire year, figure your OID using the following method. Tax forms for college students Divide the OID shown by 12. Tax forms for college students Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. Tax forms for college students This is the OID to include in income unless you paid an acquisition premium. Tax forms for college students The reduction for acquisition premium is discussed next. Tax forms for college students Reduction for acquisition premium. Tax forms for college students   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. Tax forms for college students Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. Tax forms for college students This is the monthly OID. Tax forms for college students Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. Tax forms for college students (If the result is zero or less, stop here. Tax forms for college students You did not pay an acquisition premium. Tax forms for college students ) Divide the amount figured in (2) by the number of complete months, and any part of a month, from the date of your purchase to the maturity date. Tax forms for college students Subtract the amount figured in (3) from the amount figured in (1). Tax forms for college students This is the OID to include in income for each month you hold the debt instrument during the year. Tax forms for college students Transfers during the month. Tax forms for college students   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, the ratable monthly portion of OID for the month of sale is divided between the seller and the buyer according to the number of days each held the debt instrument. Tax forms for college students Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. Tax forms for college students Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. Tax forms for college students For information about showing the correct OID on your tax return, see How To Report OID, earlier. Tax forms for college students Form 1099-OID. Tax forms for college students   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Tax forms for college students However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Tax forms for college students See Constant yield method and the discussions on acquisition premium that follow, later. Tax forms for college students If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Tax forms for college students irs. Tax forms for college students gov/pub1212 by clicking the link under Recent Developments. Tax forms for college students Form 1099-OID not received. Tax forms for college students    The OID listed is for each $1,000 of redemption price. Tax forms for college students You must adjust the listed amount if your debt instrument has a different principal amount. Tax forms for college students For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Tax forms for college students   If you held the debt instrument the entire year, use the OID shown in Section I-A. Tax forms for college students (If your instrument is not listed in Section I-A, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Tax forms for college students ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. Tax forms for college students Method 1. Tax forms for college students    Divide the total OID for a calendar year by 365 (366 for leap years). Tax forms for college students Multiply the result in (1) by the number of days you held the debt instrument during that particular year. Tax forms for college students  This computation is an approximation and may result in a slightly higher OID than Method 2. Tax forms for college students Method 2. Tax forms for college students    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. Tax forms for college students (See Accrual period under Constant yield method, next. Tax forms for college students ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Tax forms for college students If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. Tax forms for college students Add the results of (2) and (3). Tax forms for college students This is the OID to include in income, unless you paid an acquisition premium. Tax forms for college students (The reduction for acquisition premium is discussed later. Tax forms for college students ) Constant yield method. Tax forms for college students   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. Tax forms for college students OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Tax forms for college students   Figure the OID allocable to any accrual period as follows. Tax forms for college students Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. Tax forms for college students Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Tax forms for college students Accrual period. Tax forms for college students   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. Tax forms for college students Your tax year will usually include parts of two accrual periods. Tax forms for college students Daily OID. Tax forms for college students   The OID for any accrual period is allocated equally to each day in the accrual period. Tax forms for college students You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. Tax forms for college students If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. Tax forms for college students Figuring daily OID. Tax forms for college students   The daily OID for the initial accrual period is figured using the following formula. Tax forms for college students   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Tax forms for college students Reduction for acquisition premium on debt instruments purchased before July 19, 1984. Tax forms for college students   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Tax forms for college students Figure the daily acquisition premium by dividing the total acquisition premium by the number of days in the period beginning on your purchase date and ending on the day before the date of maturity. Tax forms for college students Reduction for acquisition premium on debt instruments purchased after July 18, 1984. Tax forms for college students   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Tax forms for college students However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. Tax forms for college students To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. Tax forms for college students The numerator is the acquisition premium. Tax forms for college students The denominator is the total OID remaining for the debt instrument after your purchase date. Tax forms for college students Section I-A is available at www. Tax forms for college students irs. Tax forms for college students gov/pub1212 and clicking the link under Recent Developments. Tax forms for college students Using Section I-A to figure accumulated OID. Tax forms for college students   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. Tax forms for college students The amount from the “Total OID to January 1, YYYY” column for your debt instrument. Tax forms for college students The OID from January 1 of a calendar year to the date of purchase, figured as follows. Tax forms for college students Multiply the daily OID for the first accrual period in the calendar year by the number of days from January 1 to the date of purchase, or the end of the accrual period if the debt instrument was purchased in the second or third accrual period. Tax forms for college students Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. Tax forms for college students Add the amounts figured in (2a) and (2b). Tax forms for college students Debt Instruments Issued After 1984 If you hold debt instruments issued after 1984, you must report part of the OID in gross income each year that you own the debt instruments. Tax forms for college students You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. Tax forms for college students Your basis in the debt instrument is increased by the OID you include in income. Tax forms for college students For information about showing the correct OID on your tax return, see How To Report OID, earlier. Tax forms for college students Form 1099-OID. Tax forms for college students   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. Tax forms for college students However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Tax forms for college students See Constant yield method and Reduction for acquisition premium, later. Tax forms for college students   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. Tax forms for college students See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. Tax forms for college students If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-B available at www. Tax forms for college students irs. Tax forms for college students gov/pub1212 by clicking the link under Recent Developments. Tax forms for college students Form 1099-OID not received. Tax forms for college students   The OID listed is for each $1,000 of redemption price. Tax forms for college students You must adjust the listed amount if your debt instrument has a different principal amount. Tax forms for college students For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Tax forms for college students   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. Tax forms for college students (If your debt instrument is not listed in Section I-B, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Tax forms for college students ) If you did not hold the debt instrument the entire year, figure your OID as follows. Tax forms for college students Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. Tax forms for college students (See Accrual period under Constant yield method, later. Tax forms for college students ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Tax forms for college students Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. Tax forms for college students Add the results of (2) and (3). Tax forms for college students This is the OID to include in income for that year, unless you paid an acquisition premium. Tax forms for college students (The reduction for acquisition premium is discussed later. Tax forms for college students ) Tax-exempt bond. Tax forms for college students   If you own a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Tax forms for college students You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. Tax forms for college students In general, use the rules that follow to determine your OID. Tax forms for college students Constant yield method. Tax forms for college students   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. Tax forms for college students (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. Tax forms for college students ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Tax forms for college students   Figure the OID allocable to any accrual period as follows. Tax forms for college students Multiply the adjusted issue price at the beginning of the accrual period by a fraction. Tax forms for college students The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. Tax forms for college students The yield must be stated appropriately taking into account the length of the particular accrual period. Tax forms for college students Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Tax forms for college students Accrual period. Tax forms for college students   For debt instruments issued after 1984 and before April 4, 1994, an accrual period is each 6-month period that ends on the day that corresponds to the stated maturity date of the debt instrument or the date 6 months before that date. Tax forms for college students For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. Tax forms for college students Any short period is included as the first accrual period. Tax forms for college students   For debt instruments issued after April 3, 1994, accrual periods may be of any length and may vary in length over the term of the debt instrument, as long as each accrual period is no longer than 1 year and all payments are made on the first or last day of an accrual period. Tax forms for college students However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. Tax forms for college students Daily OID. Tax forms for college students   The OID for any accrual period is allocated equally to each day in the accrual period. Tax forms for college students Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. Tax forms for college students Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. Tax forms for college students If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. Tax forms for college students Figuring daily OID. Tax forms for college students   The daily OID for the initial accrual period is figured using the following formula. Tax forms for college students   (ip × ytm/n) − qsi     p   ip = issue price ytm = yield to maturity n = number of accrual periods in 1 year qsi = qualified stated interest p = number of days in accrual period       The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Tax forms for college students Example 5. Tax forms for college students On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. Tax forms for college students 17. Tax forms for college students According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. Tax forms for college students The yield to maturity is 12%, compounded semiannually. Tax forms for college students The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. Tax forms for college students The accrual periods are the 6-month periods ending on each of these dates. Tax forms for college students The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). Tax forms for college students The daily OID for the first accrual period is figured as follows. Tax forms for college students   ($86,235. Tax forms for college students 17 x . Tax forms for college students 12/2) – $5,000     181 days     = $174. Tax forms for college students 11020 = $. Tax forms for college students 96193   181           The adjusted issue price at the beginning of the second accrual period is the issue price plus the OID previously includible in income ($86,235. Tax forms for college students 17 + $174. Tax forms for college students 11), or $86,409. Tax forms for college students 28. Tax forms for college students The number of days for the second accrual period (July 1 through December 31) is 184 days. Tax forms for college students The daily OID for the second accrual period is figured as follows. Tax forms for college students   ($86,409. Tax forms for college students 28 x . Tax forms for college students 12/2) – $5,000     184 days     = $184. Tax forms for college students 55681 = $1. Tax forms for college students 00303   184 Since the first and second accrual periods coincide exactly with your tax year, you include in income for Year 1 the OID allocable to the first two accrual periods, $174. Tax forms for college students 11 ($. Tax forms for college students 95665 × 182 days) plus $184. Tax forms for college students 56 ($1. Tax forms for college students 00303 × 184 days), or $358. Tax forms for college students 67. Tax forms for college students Add the OID to the $10,000 interest you report on your income tax return for Year 1. Tax forms for college students Example 6. Tax forms for college students Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. Tax forms for college students Also, the interest payment dates are October 31 and April 30 of each calendar year. Tax forms for college students The accrual periods are the 6-month periods ending on each of these dates. Tax forms for college students The number of days for the first accrual period (May 1 through October 31) is 184 days. Tax forms for college students The daily OID for the first accrual period is figured as follows. Tax forms for college students   ($86,235. Tax forms for college students 17 x . Tax forms for college students 12/2) – $5,000     184 days     = $174. Tax forms for college students 11020 = $. Tax forms for college students 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). Tax forms for college students The daily OID for the second accrual period is figured as follows. Tax forms for college students   ($86,409. Tax forms for college students 28 x . Tax forms for college students 12/2) – $5,000     181 days     = $184. Tax forms for college students 55681 = $1. Tax forms for college students 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. Tax forms for college students 31 of OID in income. Tax forms for college students This is $174. Tax forms for college students 11 ($. Tax forms for college students 94625 × 184 days) for the period May 1 through October 31 plus $62. Tax forms for college students 20 ($1. Tax forms for college students 01965 × 61 days) for the period November 1 through December 31. Tax forms for college students The OID is added to the $5,000 interest income paid on October 31 of Year 1. Tax forms for college students Your basis in the debt instrument is increased by the OID you include in income. Tax forms for college students On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. Tax forms for college students 48 ($86,235. Tax forms for college students 17 + $236. Tax forms for college students 31). Tax forms for college students Short first accrual period. Tax forms for college students   You may have to make adjustments if a debt instrument has a short first accrual period. Tax forms for college students For example, a debt instrument with 6-month accrual periods that is issued on February 15 and matures on October 31 has a short first accrual period that ends April 30. Tax forms for college students (The remaining accrual periods begin on May 1 and November 1. Tax forms for college students ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. Tax forms for college students You may use any reasonable compounding method in determining OID for a short period. Tax forms for college students Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). Tax forms for college students Consult your tax advisor for more information about making this computation. Tax forms for college students   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. Tax forms for college students Reduction for acquisition premium. Tax forms for college students   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Tax forms for college students To figure the daily acquisition premium, multiply the daily OID by the following fraction. Tax forms for college students The numerator is the acquisition premium. Tax forms for college students The denominator is the total OID remaining for the debt instrument after your purchase date. Tax forms for college students Example 7. Tax forms for college students Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. Tax forms for college students The adjusted issue price on November 1 of Year 1 is $86,409. Tax forms for college students 28 ($86,235. Tax forms for college students 17 + $174. Tax forms for college students 11). Tax forms for college students In this case, you paid an acquisition premium of $590. Tax forms for college students 72 ($87,000 − $86,409. Tax forms for college students 28). Tax forms for college students The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. Tax forms for college students 1) Daily OID on date of purchase (2nd accrual period) $1. Tax forms for college students 01965*  2)  Acquisition premium $590. Tax forms for college students 72    3)  Total OID remaining after purchase date ($13,764. Tax forms for college students 83 − $174. Tax forms for college students 11) 13,590. Tax forms for college students 72   4) Line 2 ÷ line 3 . Tax forms for college students 04346  5)  Line 1 × line 4 . Tax forms for college students 04432  6)  Daily OID reduced for the acquisition premium. Tax forms for college students Line 1 − line 5 $0. Tax forms for college students 97533  * As shown in Example 6. Tax forms for college students The total OID to include in income for Year 1 is $59. Tax forms for college students 50 ($. Tax forms for college students 97533 × 61 days). Tax forms for college students Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. Tax forms for college students In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. Tax forms for college students If you hold a contingent payment bond, you must report OID as it accrues each year. Tax forms for college students Because the actual payments on a contingent payment debt instrument cannot be known in advance, issuers and holders cannot use the constant yield method (discussed earlier under Debt Instruments Issued After 1984) without making certain assumptions about the payments on the debt instrument. Tax forms for college students To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. Tax forms for college students Noncontingent bond method. Tax forms for college students    Under this method, the issuer must compute a comparable yield for the debt instrument and, based on this yield, construct a projected payment schedule for the instrument, which includes a projected fixed amount for each contingent payment. Tax forms for college students In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. Tax forms for college students When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. Tax forms for college students If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. Tax forms for college students If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. Tax forms for college students Form 1099-OID. Tax forms for college students   The amount shown on Form 1099-OID in box 1 you receive for a contingent payment debt instrument may not be the correct amount to include in income. Tax forms for college students For example, the amount may not be correct if the contingent payment was different from the projected amount. Tax forms for college students If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. Tax forms for college students For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. Tax forms for college students Figuring OID. Tax forms for college students   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. Tax forms for college students The issuer must make these available to you. Tax forms for college students Comparable yield. Tax forms for college students   The comparable yield generally is the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the contingent payment debt instrument. Tax forms for college students The comparable yield is determined as of the debt instrument's issue date. Tax forms for college students Projected payment schedule. Tax forms for college students   The projected payment schedule for a contingent payment debt instrument includes all fixed payments due under the instrument and a projected fixed amount for each contingent payment. Tax forms for college students The projected payment schedule is created by the issuer as of the debt instrument's issue date. Tax forms for college students It is used to determine the issuer's and holder's interest accruals and adjustments. Tax forms for college students Steps for figuring OID. Tax forms for college students   Figure the OID on a contingent payment debt instrument in two steps. Tax forms for college students Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. Tax forms for college students Use the comparable yield as the yield to maturity. Tax forms for college students In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). Tax forms for college students Do not treat any amount payable as qualified stated interest. Tax forms for college students Adjust the OID in (1) to account for actual contingent payments. Tax forms for college students If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. Tax forms for college students If the contingent payment is less than the projected fixed amount, you have a negative adjustment. Tax forms for college students Net positive adjustment. Tax forms for college students   A net positive adjustment exists for a tax year when the total of any positive adjustments described in (2) above for the tax year is more than the total of any negative adjustments for the tax year. Tax forms for college students Treat a net positive adjustment as additional OID for the tax year. Tax forms for college students Net negative adjustment. Tax forms for college students   A net negative adjustment exists for a tax year when the total of any negative adjustments described in (2) above for the tax year is more than the total of any positive adjustments for the tax year. Tax forms for college students Use a net negative adjustment to offset OID on the debt instrument for the tax year. Tax forms for college students If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. Tax forms for college students However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. Tax forms for college students You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. Tax forms for college students Basis adjustments. Tax forms for college students   In general, increase your basis in a contingent payment debt instrument by the OID included in income. Tax forms for college students Your basis, however, is not affected by any negative or positive adjustments. Tax forms for college students Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. Tax forms for college students Treatment of gain or loss on sale or exchange. Tax forms for college students   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. Tax forms for college students If you sell a contingent payment debt instrument at a loss, your loss is an ordinary loss to the extent of your prior OID accruals on the debt instrument. Tax forms for college students If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. Tax forms for college students See Regulations section 1. Tax forms for college students 1275-4 for exceptions to these rules. Tax forms for college students Premium, acquisition premium, and market discount. Tax forms for college students   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. Tax forms for college students See Regulations section 1. Tax forms for college students 1275-4 to determine how to account for these items. Tax forms for college students Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. Tax forms for college students An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d

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The Tax Forms For College Students

Tax forms for college students Index Symbols 403(b) account, What Is a 403(b) Plan? 403(b) plans Basics, 403(b) Plan Basics Benefits, What Are the Benefits of Contributing to a 403(b) Plan? Participation, Who Can Participate in a 403(b) Plan? Self-employed ministers, Who Can Set Up a 403(b) Account? What is a 403(b) plan?, What Is a 403(b) Plan? Who can set up a 403(b) account?, Who Can Set Up a 403(b) Account? A After-tax contributions, How Can Contributions Be Made to My 403(b) Account? Assistance (see Tax help) B Basics, 403(b) Plan Basics Benefits, What Are the Benefits of Contributing to a 403(b) Plan? C Catch-up contributions, Catch-Up Contributions Chaplain, Ministers. Tax forms for college students Church employees, Ministers and Church Employees Years of service, Changes to Years of Service Comments on publication, Comments and suggestions. Tax forms for college students Contributions, How Can Contributions Be Made to My 403(b) Account? After-tax, How Can Contributions Be Made to My 403(b) Account? Catch-up, Catch-Up Contributions Elective deferrals, How Can Contributions Be Made to My 403(b) Account?, Elective deferrals only. Tax forms for college students Nonelective, How Can Contributions Be Made to My 403(b) Account? Reporting, Do I Report Contributions on My Tax Return? Correcting excess contributions, What Happens If I Have Excess Contributions? Credit, for retirement savings contributions, Retirement Savings Contributions Credit (Saver's Credit) D Distributions, Distributions and Rollovers, Distributions 10-year tax option, No Special 10-Year Tax Option 90-24 transfer, Contract exchanges. Tax forms for college students Deceased employees, Spouses of deceased employees. Tax forms for college students Direct rollover, Direct rollovers of 403(b) plan distributions. Tax forms for college students Eligible retirement plans, Eligible retirement plans. Tax forms for college students Frozen deposit, Frozen deposits. Tax forms for college students Gift tax, Gift Tax Minimum required, Minimum Required Distributions Qualified domestic relations order, Qualified domestic relations order. Tax forms for college students Rollovers, Tax-Free Rollovers, Rollovers to and from 403(b) plans. Tax forms for college students Second rollover, Second rollover. Tax forms for college students Transfers, Transfer of Interest in 403(b) Contract E Elective deferrals, How Can Contributions Be Made to My 403(b) Account?, Elective deferrals only. Tax forms for college students Eligible employees, Eligible employees. Tax forms for college students , Church employee. Tax forms for college students Employer's annual work period, Employer's annual work period. Tax forms for college students Excess contributions, Excess Contributions Correcting, What Happens If I Have Excess Contributions? Determining, How Do I Know If I Have Excess Contributions? Excess amounts, Excess Annual Addition Excess deferrals, Excess Annual Addition Excess elective deferral, Excess Elective Deferral Excise tax, Excise Tax Excise tax Excess contributions, Excise Tax Reporting requirement, Reporting requirement. Tax forms for college students F Free tax services, How To Get Tax Help, Free help with your tax return. Tax forms for college students Full-time or part-time, Years of Service G Gift tax, Gift Tax H Help (see Tax help) I Incidental life insurance, Cost of Incidental Life Insurance Includible compensation, Includible Compensation 403(b) plan, Changes to Includible Compensation Figuring, Figuring Includible Compensation for Your Most Recent Year of Service Foreign missionaries, Changes to Includible Compensation Incidental life insurance, Cost of Incidental Life Insurance Self-employed ministers, Changes to Includible Compensation Includible compensation for your most recent year of service Definition, Definition. Tax forms for college students L Limit on annual additions, Limit on Annual Additions Limit on elective deferrals, Limit on Elective Deferrals 15-year rule, 15-Year Rule Figuring, Figuring the Limit on Elective Deferrals General limit, General Limit M MAC (see Maximum amount contributable) Maximum amount contributable, Maximum Amount Contributable (MAC) Components, Components of Your MAC How to figure MAC, How Do I Figure My MAC? When to figure MAC, When Should I Figure My MAC? Minimum required distributions, Minimum Required Distributions Ministers, Ministers. Tax forms for college students , Ministers and Church Employees Missing children, Reminder More information (see Tax help) Most recent year of service, Most Recent Year of Service Most recent year of service, figuring, Figuring Your Most Recent Year of Service N Nonelective contributions, How Can Contributions Be Made to My 403(b) Account?, Nonelective contributions only. Tax forms for college students P Pre-tax contributions, Includible Compensation, Table 3-4. Tax forms for college students Worksheet B. Tax forms for college students Includible Compensation for Your Most Recent Year of Service1 , Rollovers to and from 403(b) plans. Tax forms for college students , Worksheet B. Tax forms for college students Includible Compensation for Your Most Recent Year of Service1 Publications (see Tax help) Q Qualified domestic relations order, Qualified domestic relations order. Tax forms for college students R Reporting Contributions Self-employed ministers, Self-employed ministers. Tax forms for college students Reporting contributions Chaplains, Chaplains. Tax forms for college students Required distributions, Minimum Required Distributions Retirement savings contributions credit, What's New for 2013, What's New for 2014, Retirement Savings Contributions Credit (Saver's Credit) Rollovers, Distributions and Rollovers, Tax-Free Rollovers Roth contribution program, Roth contribution program. Tax forms for college students S Salary reduction agreement, Limit on Elective Deferrals Self-employed ministers, Ministers. Tax forms for college students , Who Can Set Up a 403(b) Account?, Self-employed minister. Tax forms for college students , Self-employed ministers. Tax forms for college students , Self-employed minister. Tax forms for college students Suggestions for publication, Comments and suggestions. Tax forms for college students T Tax help, How To Get Tax Help Transfers, Transfer of Interest in 403(b) Contract 90-24 transfer, Transfer of Interest in 403(b) Contract Conservatorship, Contract exchanges. Tax forms for college students Direct-trustee-to-trustee, Direct trustee-to-trustee transfer. Tax forms for college students Insolvency, Tax-free transfers for certain cash distributions. Tax forms for college students Permissive service credit, Permissive service credit. Tax forms for college students TTY/TDD information, How To Get Tax Help V Voluntary deductible contributions, Voluntary deductible contributions. Tax forms for college students W What is a 403(b) plan?, What Is a 403(b) Plan? Y Years of service, Years of Service Church employees, Church employee. Tax forms for college students , Changes to Years of Service Definition, Definition Employer's annual work period, Employer's annual work period. Tax forms for college students Full year of service, Full year of service. Tax forms for college students Full-time employee for the full year, Full-Time Employee for the Full Year Full-time for part of the year, Full-time for part of the year. Tax forms for college students Other than full-time for the full year, Other Than Full-Time for the Full Year Part-time for the full year, Part-time for the full year. Tax forms for college students Part-time for the part of the year, Part-time for part of the year. Tax forms for college students Self-employed minister, Changes to Years of Service Total years of service, Total years of service. Tax forms for college students Prev  Up     Home   More Online Publications