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Turbotax 2010 Download

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Turbotax 2010 download 1. Turbotax 2010 download   Importance of Records Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Benefits of Recordkeeping Kinds of Records To Keep How Long To Keep Records Introduction A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. Turbotax 2010 download This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes. Turbotax 2010 download Tax records are not the only type of records you need to keep for your farming business. Turbotax 2010 download You should also keep records that measure your farm's financial performance. Turbotax 2010 download This publication only discusses tax records. Turbotax 2010 download The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. Turbotax 2010 download For information on recordkeeping, you can purchase and download Financial Guidelines for Agricultural Producers at www. Turbotax 2010 download ffsc. Turbotax 2010 download org. Turbotax 2010 download For more information, contact Countryside Marketing, Inc. Turbotax 2010 download in the following manner. Turbotax 2010 download Call 262-253-6902. Turbotax 2010 download Send a fax to 262-253-6903. Turbotax 2010 download Write to: Farm Financial Standards Council N78 W14573 Appleton Ave. Turbotax 2010 download , #287 Menomonee Falls, WI 53051. Turbotax 2010 download Topics - This chapter discusses: Benefits of recordkeeping Kinds of records to keep How long to keep records Useful Items - You may want to see: Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses See chapter 16 for information about getting publications. Turbotax 2010 download Benefits of Recordkeeping Everyone in business, including farmers, must keep appropriate records. Turbotax 2010 download Recordkeeping will help you do the following. Turbotax 2010 download Monitor the progress of your farming business. Turbotax 2010 download   You need records to monitor the progress of your farming business. Turbotax 2010 download Records can show whether your business is improving, which items are selling, or what changes you need to make. Turbotax 2010 download Records can help you make better decisions that may increase the likelihood of business success. Turbotax 2010 download Prepare your financial statements. Turbotax 2010 download   You need records to prepare accurate financial statements. Turbotax 2010 download These include income (profit and loss) statements and balance sheets. Turbotax 2010 download These statements can help you in dealing with your bank or creditors and help you to manage your farm business. Turbotax 2010 download Identify source of receipts. Turbotax 2010 download   You will receive money or property from many sources. Turbotax 2010 download Your records can identify the source of your receipts. Turbotax 2010 download You need this information to separate farm from nonfarm receipts and taxable from nontaxable income. Turbotax 2010 download Keep track of deductible expenses. Turbotax 2010 download   You may forget expenses when you prepare your tax return unless you record them when they occur. Turbotax 2010 download Prepare your tax returns. Turbotax 2010 download   You need records to prepare your tax return. Turbotax 2010 download For example, your records must support the income, expenses, and credits you report. Turbotax 2010 download Generally, these are the same records you use to monitor your farming business and prepare your financial statements. Turbotax 2010 download Support items reported on tax returns. Turbotax 2010 download   You must keep your business records available at all times for inspection by the IRS. Turbotax 2010 download If the IRS examines any of your tax returns, you may be asked to explain the items reported. Turbotax 2010 download A complete set of records will speed up the examination. Turbotax 2010 download Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Turbotax 2010 download You can choose any recordkeeping system suited to your farming business that clearly shows, for example, your income and expenses. Turbotax 2010 download You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Turbotax 2010 download See  chapter 2. Turbotax 2010 download If you are in more than one business, you should keep a complete and separate set of records for each business. Turbotax 2010 download A corporation should keep minutes of board of directors' meetings. Turbotax 2010 download Your recordkeeping system should include a summary of your business transactions. Turbotax 2010 download This summary is ordinarily made in accounting journals and ledgers. Turbotax 2010 download For example, they must show your gross income, as well as your deductions and credits. Turbotax 2010 download In addition, you must keep supporting documents. Turbotax 2010 download Purchases, sales, payroll, and other transactions you have in your business generate supporting documents such as invoices and receipts. Turbotax 2010 download These documents contain the information you need to record in your journals and ledgers. Turbotax 2010 download It is important to keep these documents because they support the entries in your journals and ledgers and on your tax return. Turbotax 2010 download Keep them in an orderly fashion and in a safe place. Turbotax 2010 download For instance, organize them by year and type of income or expense. Turbotax 2010 download Electronic records. Turbotax 2010 download   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Turbotax 2010 download When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Turbotax 2010 download An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Turbotax 2010 download The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Turbotax 2010 download All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Turbotax 2010 download Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Turbotax 2010 download The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Turbotax 2010 download You still have the responsibility of retaining any other books and records that are required to be retained. Turbotax 2010 download The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Turbotax 2010 download This test is not considered an examination and the results must be shared with you. Turbotax 2010 download If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Turbotax 2010 download If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copybooks and records in a manner that allows you and the IRS to determine your correct tax. Turbotax 2010 download For details on electronic storage system requirements, see Rev. Turbotax 2010 download Proc. Turbotax 2010 download 97-22. Turbotax 2010 download You can find Rev. Turbotax 2010 download Proc. Turbotax 2010 download 97-22 on page 9 of Internal Revenue Bulletin 1997-13 at  www. Turbotax 2010 download irs. Turbotax 2010 download gov/pub/irs-irbs/irb97-13. Turbotax 2010 download pdf. Turbotax 2010 download Travel, transportation, entertainment, and gift expenses. Turbotax 2010 download   Specific recordkeeping rules apply to these expenses. Turbotax 2010 download For more information, see Publication 463. Turbotax 2010 download Employment taxes. Turbotax 2010 download   There are specific employment tax records you must keep. Turbotax 2010 download For a list, see Publication 51 (Circular A). Turbotax 2010 download Excise taxes. Turbotax 2010 download   See How To Claim a Credit or Refund in chapter 14 for the specific records you must keep to verify your claim for credit or refund of excise taxes on certain fuels. Turbotax 2010 download Assets. Turbotax 2010 download   Assets are the property, such as machinery and equipment, you own and use in your business. Turbotax 2010 download You must keep records to verify certain information about your business assets. Turbotax 2010 download You need records to figure your annual depreciation deduction and the gain or (loss) when you sell the assets. Turbotax 2010 download Your records should show all the following. Turbotax 2010 download When and how you acquired the asset. Turbotax 2010 download Purchase price. Turbotax 2010 download Cost of any improvements. Turbotax 2010 download Section 179 deduction taken. Turbotax 2010 download Deductions taken for depreciation. Turbotax 2010 download Deductions taken for casualty losses, such as losses resulting from fires or storms. Turbotax 2010 download How you used the asset. Turbotax 2010 download When and how you disposed of the asset. Turbotax 2010 download Selling price. Turbotax 2010 download Expenses of sale. Turbotax 2010 download   The following are examples of records that may show this information. Turbotax 2010 download Purchase and sales invoices. Turbotax 2010 download Real estate closing statements. Turbotax 2010 download Canceled checks. Turbotax 2010 download Bank statements. Turbotax 2010 download Financial account statements as proof of payment. Turbotax 2010 download   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Turbotax 2010 download These include account statements prepared for the financial institution by a third party. Turbotax 2010 download These account statements must be legible. Turbotax 2010 download The following table lists acceptable account statements. Turbotax 2010 download IF payment is by. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download THEN the statement must show the. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download Check Check number. Turbotax 2010 download Amount. Turbotax 2010 download Payee's name. Turbotax 2010 download Date the check amount was posted to the account by the financial institution. Turbotax 2010 download Electronic funds  transfer Amount transferred. Turbotax 2010 download Payee's name. Turbotax 2010 download Date the transfer was posted to the account by the financial institution. Turbotax 2010 download Credit card Amount charged. Turbotax 2010 download Payee's name. Turbotax 2010 download Transaction date. Turbotax 2010 download    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Turbotax 2010 download You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Turbotax 2010 download Tax returns. Turbotax 2010 download   Keep copies of your filed tax returns. Turbotax 2010 download They help in preparing future tax returns and making computations if you file an amended return. Turbotax 2010 download Keep copies of your information returns such as Form 1099, Schedule K-1, and Form W-2. Turbotax 2010 download How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Turbotax 2010 download Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. Turbotax 2010 download A period of limitations is the period of time after which no legal action can be brought. Turbotax 2010 download Generally, that means you must keep your records for at least 3 years from when your tax return was due or filed or within 2 years of the date the tax was paid, whichever is later. Turbotax 2010 download However, certain records must be kept for a longer period of time, as discussed below. Turbotax 2010 download Employment taxes. Turbotax 2010 download   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Turbotax 2010 download Assets. Turbotax 2010 download   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Turbotax 2010 download You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure your basis for computing gain or (loss) when you sell or otherwise dispose of the property. Turbotax 2010 download   You may need to keep records relating to the basis of property longer than the period of limitation. Turbotax 2010 download Keep those records as long as they are important in figuring the basis of the original or replacement property. Turbotax 2010 download Generally, this means as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Turbotax 2010 download For example, if you received property in a nontaxable exchange, you must keep the records for the old property, as well as for the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Turbotax 2010 download For more information on basis, see chapter 6. Turbotax 2010 download Records for nontax purposes. Turbotax 2010 download   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Turbotax 2010 download For example, your insurance company or creditors may require you to keep them longer than the IRS does. Turbotax 2010 download Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Departmento de Asuntos Del Consumidor

Website: Departmento de Asuntos Del Consumidor

Address: Departmento de Asuntos Del Consumidor
Apartado 41059
Minillas Station
Santurce, PR 00940

Phone Number: 787-722-7555

Toll-free: 1-866-520-3226 (PR)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Oficina del Comisionado de Instituciones Financieras

Website: Oficina del Comisionado de Instituciones Financieras

Address: Oficina del Comisionado de Instituciones Financieras
PO Box 11855
San Juan, PR 00910-3855

Phone Number: 787-723-3131

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Office of the Commissioner of Insurance

Website: Office of the Commissioner of Insurance

Address: Office of the Commissioner of Insurance
B5 Calle Tabonuco, Suite 216 PMB 356
Guaynabo, PR 00968-3029

Phone Number: 787-304-8686

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Office of the Commissioner of Financial Institutions

Website: Office of the Commissioner of Financial Institutions

Address: Office of the Commissioner of Financial Institutions
Securities Division
PO Box 11855
San Juan, PR 00910-3855

Phone Number: 787-723-3131

TTY: 1-800-981-7711 (Consumers)

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
PO Box 190870
San Juan, PR 00918

Phone Number: 787-756-1919

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The Turbotax 2010 Download

Turbotax 2010 download 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. Turbotax 2010 download Adjustment for premium. Turbotax 2010 download Adjustment for acquisition premium. Turbotax 2010 download Adjustment for market discount. Turbotax 2010 download 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. Turbotax 2010 download “Original issue discount” is defined first. Turbotax 2010 download The other terms are listed alphabetically. Turbotax 2010 download Original issue discount (OID). Turbotax 2010 download   OID is a form of interest. Turbotax 2010 download 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). Turbotax 2010 download Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. Turbotax 2010 download Accrual period. Turbotax 2010 download   An accrual period is an interval of time used to measure OID. Turbotax 2010 download The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. Turbotax 2010 download Acquisition premium. Turbotax 2010 download   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. Turbotax 2010 download A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. Turbotax 2010 download See Premium, later. Turbotax 2010 download Adjusted issue price. Turbotax 2010 download   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. Turbotax 2010 download In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. Turbotax 2010 download 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. Turbotax 2010 download Debt instrument. Turbotax 2010 download   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). Turbotax 2010 download It generally does not include an annuity contract. Turbotax 2010 download Issue price. Turbotax 2010 download   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. Turbotax 2010 download Market discount. Turbotax 2010 download   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. Turbotax 2010 download 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. Turbotax 2010 download The market discount is the difference between the issue price plus accrued OID and your adjusted basis. Turbotax 2010 download Premium. Turbotax 2010 download   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. Turbotax 2010 download The premium is the excess of the adjusted basis over the payable amounts. Turbotax 2010 download See Publication 550 for information on the tax treatment of bond premium. Turbotax 2010 download Qualified stated interest. Turbotax 2010 download   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. Turbotax 2010 download Stated redemption price at maturity. Turbotax 2010 download   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. Turbotax 2010 download Yield to maturity (YTM). Turbotax 2010 download   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. Turbotax 2010 download The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. Turbotax 2010 download If you do not have this information, consult your broker, tax advisor, or the issuer. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. Turbotax 2010 download 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. Turbotax 2010 download The following discussions explain what information is contained in each section of the list. Turbotax 2010 download Section I. Turbotax 2010 download   This section contains publicly offered, long-term debt instruments. Turbotax 2010 download Section I-A: Corporate Debt Instruments Issued Before 1985. Turbotax 2010 download Section I-B: Corporate Debt Instruments Issued After 1984. Turbotax 2010 download Section I-C: Inflation-Indexed Debt Instruments. Turbotax 2010 download For each publicly offered debt instrument in Section I, the list contains the following information. Turbotax 2010 download The name of the issuer. Turbotax 2010 download The Committee on Uniform Security Identification Procedures (CUSIP) number. Turbotax 2010 download The issue date. Turbotax 2010 download The maturity date. Turbotax 2010 download The issue price expressed as a percent of principal or of stated redemption price at maturity. Turbotax 2010 download The annual stated or coupon interest rate. Turbotax 2010 download (This rate is shown as 0. Turbotax 2010 download 00 if no annual interest payments are provided. Turbotax 2010 download ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. Turbotax 2010 download The total OID accrued up to January 1 of a calendar year. Turbotax 2010 download (This information is not available for every instrument. Turbotax 2010 download ) 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. Turbotax 2010 download The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. Turbotax 2010 download Section II. Turbotax 2010 download   This section contains stripped coupons and principal components of U. Turbotax 2010 download S. Turbotax 2010 download Treasury and Government-Sponsored Enterprise debt instruments. Turbotax 2010 download 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. Turbotax 2010 download This section also includes debt instruments backed by U. Turbotax 2010 download S. Turbotax 2010 download Treasury securities that represent ownership interests in those securities. Turbotax 2010 download   The obligations listed in Section II are arranged by maturity date. Turbotax 2010 download The amounts listed are the total OID for a calendar year per $1,000 of redemption price. Turbotax 2010 download Section III. Turbotax 2010 download   This section contains short-term discount obligations. Turbotax 2010 download Section III-A: Short-Term U. Turbotax 2010 download S. Turbotax 2010 download Treasury Bills. Turbotax 2010 download Section III-B: Federal Home Loan Banks. Turbotax 2010 download Section III-C: Federal National Mortgage Association. Turbotax 2010 download Section III-D: Federal Farm Credit Banks. Turbotax 2010 download Section III-E: Federal Home Loan Mortgage Corporation. Turbotax 2010 download Section III-F: Federal Agricultural Mortgage Corporation. Turbotax 2010 download    Information that supplements Section III-A is available on the Internet at http://www. Turbotax 2010 download treasurydirect. Turbotax 2010 download gov/tdhome. Turbotax 2010 download htm. Turbotax 2010 download   The short-term obligations listed in this section are arranged by maturity date. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. Turbotax 2010 download U. Turbotax 2010 download S. Turbotax 2010 download savings bonds. Turbotax 2010 download Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. Turbotax 2010 download Obligations issued by tax-exempt organizations. Turbotax 2010 download OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. Turbotax 2010 download Mortgage-backed securities and mortgage participation certificates. Turbotax 2010 download Long-term OID debt instruments issued before May 28, 1969. Turbotax 2010 download Short-term obligations, other than the obligations listed in Section III. Turbotax 2010 download Debt instruments issued at a discount by states or their political subdivisions. Turbotax 2010 download REMIC regular interests and CDOs. Turbotax 2010 download Commercial paper and banker's acceptances issued at a discount. Turbotax 2010 download Obligations issued at a discount by individuals. Turbotax 2010 download Foreign obligations not traded in the United States and obligations not issued in the United States. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download See Backup Withholding, later. Turbotax 2010 download 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. Turbotax 2010 download 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). Turbotax 2010 download Electronic payee statements. Turbotax 2010 download   You can issue Form 1099-OID electronically with the consent of the recipient. Turbotax 2010 download More information. Turbotax 2010 download   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. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. Turbotax 2010 download Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. Turbotax 2010 download 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. Turbotax 2010 download A special rule is used to determine the original issue price for information reporting on U. Turbotax 2010 download S. Turbotax 2010 download Treasury bills (T-bills) listed in Section III-A. Turbotax 2010 download 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. Turbotax 2010 download This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. Turbotax 2010 download 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. Turbotax 2010 download Example 1. Turbotax 2010 download There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. Turbotax 2010 download The price actually paid by the owner cannot be established by owner or middleman records. Turbotax 2010 download 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. Turbotax 2010 download The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. Turbotax 2010 download 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. Turbotax 2010 download For this purpose, you can rely on Section I of the OID list to determine the following information. Turbotax 2010 download Whether a debt instrument has OID. Turbotax 2010 download The OID to be reported on the Form 1099-OID. Turbotax 2010 download In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. Turbotax 2010 download You also can report OID on other long-term debt instruments. Turbotax 2010 download Form 1099-OID. Turbotax 2010 download   On Form 1099-OID for a calendar year show the following information. Turbotax 2010 download Box 1. Turbotax 2010 download The OID for the actual dates the owner held the debt instruments during a calendar year. Turbotax 2010 download To determine this amount, see Figuring OID, next. Turbotax 2010 download Box 2. Turbotax 2010 download The qualified stated interest paid or credited during the calendar year. Turbotax 2010 download Interest reported here is not reported on Form 1099-INT. Turbotax 2010 download The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. Turbotax 2010 download Box 3. Turbotax 2010 download Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. Turbotax 2010 download Do not reduce the amounts in boxes 1 and 2 by the forfeiture. Turbotax 2010 download Box 4. Turbotax 2010 download Any backup withholding for this debt instrument. Turbotax 2010 download Box 7. Turbotax 2010 download The CUSIP number, if any. Turbotax 2010 download 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. Turbotax 2010 download 50 2006). Turbotax 2010 download If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. Turbotax 2010 download Box 8. Turbotax 2010 download The OID on a U. Turbotax 2010 download S. Turbotax 2010 download Treasury obligation for the part of the year the owner held the debt instrument. Turbotax 2010 download Box 9. Turbotax 2010 download Investment expenses passed on to holders of a single-class REMIC. Turbotax 2010 download Boxes 10-12. Turbotax 2010 download Use to report any state income tax withheld for this debt instrument. Turbotax 2010 download Figuring OID. Turbotax 2010 download   You can determine the OID on a long-term debt instrument by using either of the following. Turbotax 2010 download Section I of the OID list. Turbotax 2010 download The income tax regulations. Turbotax 2010 download Using Section I. Turbotax 2010 download   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. Turbotax 2010 download 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. Turbotax 2010 download For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. Turbotax 2010 download   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. Turbotax 2010 download Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. Turbotax 2010 download Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. Turbotax 2010 download Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. Turbotax 2010 download Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. Turbotax 2010 download If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. Turbotax 2010 download Report the result on Form 1099-OID in box 1. Turbotax 2010 download Using the income tax regulations. Turbotax 2010 download   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. Turbotax 2010 download 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. Turbotax 2010 download (If you use Section I-B, the OID is figured using 6-month accrual periods. Turbotax 2010 download )   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. Turbotax 2010 download 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. Turbotax 2010 download You must file an information return showing the reportable interest and OID, if any, on the CD. Turbotax 2010 download These rules apply whether or not you sold the CD to the owner. Turbotax 2010 download Report OID on a CD in the same way as OID on other debt instruments. Turbotax 2010 download See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. Turbotax 2010 download 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. Turbotax 2010 download However, do not report the interest if either of the following apply. Turbotax 2010 download You hold the bond as a nominee for the true owner. Turbotax 2010 download The payee is a foreign person. Turbotax 2010 download See Payments to foreign person under Backup Withholding, later. Turbotax 2010 download 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. Turbotax 2010 download The coupon may have been “stripped” (separated) from the bond and separately purchased. Turbotax 2010 download 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. Turbotax 2010 download 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%. Turbotax 2010 download The backup withholding is deducted at the time a cash payment is made. Turbotax 2010 download See Pub. Turbotax 2010 download 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. Turbotax 2010 download Backup withholding generally applies in the following situations. Turbotax 2010 download The payee does not give you a taxpayer identification number (TIN). Turbotax 2010 download The IRS notifies you that the payee gave an incorrect TIN. Turbotax 2010 download The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. Turbotax 2010 download 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. Turbotax 2010 download However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. Turbotax 2010 download S. Turbotax 2010 download 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. Turbotax 2010 download Short-term obligations. Turbotax 2010 download   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. Turbotax 2010 download However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. Turbotax 2010 download   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. Turbotax 2010 download 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. Turbotax 2010 download If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. Turbotax 2010 download Long-term obligations. Turbotax 2010 download   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. Turbotax 2010 download The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. Turbotax 2010 download The amount to be withheld is limited to the cash paid. Turbotax 2010 download Registered long-term obligations with cash payments. Turbotax 2010 download   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download For any payment, the required withholding is limited to the cash paid. Turbotax 2010 download Payee not the original owner. Turbotax 2010 download   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). Turbotax 2010 download The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. Turbotax 2010 download Bearer long-term obligations with cash payments. Turbotax 2010 download   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download The required withholding at maturity is limited to the cash paid. Turbotax 2010 download Sales and redemptions. Turbotax 2010 download   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. Turbotax 2010 download Backup withholding applies in the following situations. Turbotax 2010 download The payee does not give you a TIN. Turbotax 2010 download The IRS notifies you that the payee gave an incorrect TIN. Turbotax 2010 download 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. Turbotax 2010 download Payments outside the United States to U. Turbotax 2010 download S. Turbotax 2010 download person. Turbotax 2010 download   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. Turbotax 2010 download S. Turbotax 2010 download 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. Turbotax 2010 download S. Turbotax 2010 download trade or business. Turbotax 2010 download Payments to foreign person. Turbotax 2010 download   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. Turbotax 2010 download U. Turbotax 2010 download S. Turbotax 2010 download -source amount. Turbotax 2010 download   Backup withholding and information reporting are not required for payments of U. Turbotax 2010 download S. Turbotax 2010 download -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. Turbotax 2010 download A U. Turbotax 2010 download S. Turbotax 2010 download resident is not a foreign person. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download S. Turbotax 2010 download person. Turbotax 2010 download   For information about the 28% withholding tax that may apply to payments of U. Turbotax 2010 download S. Turbotax 2010 download -source OID or interest to foreign persons, see Publication 515. Turbotax 2010 download Foreign-source amount. Turbotax 2010 download   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. Turbotax 2010 download 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. Turbotax 2010 download More information. Turbotax 2010 download   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. Turbotax 2010 download 6049-5. Turbotax 2010 download Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. Turbotax 2010 download It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. Turbotax 2010 download 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. Turbotax 2010 download However, the information provided does not cover every situation. Turbotax 2010 download More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. Turbotax 2010 download Including OID in income. Turbotax 2010 download   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. Turbotax 2010 download Exceptions. Turbotax 2010 download   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. Turbotax 2010 download U. Turbotax 2010 download S. Turbotax 2010 download savings bonds. Turbotax 2010 download Tax-exempt obligations. Turbotax 2010 download (However, see Tax-Exempt Bonds and Coupons, later. Turbotax 2010 download ) Obligations issued by individuals before March 2, 1984. Turbotax 2010 download Loans of $10,000 or less between individuals who are not in the business of lending money. Turbotax 2010 download (The dollar limit includes outstanding prior loans by the lender to the borrower. Turbotax 2010 download ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. Turbotax 2010 download   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. Turbotax 2010 download Publication 550 also discusses rules for holders of REMIC interests and CDOs. Turbotax 2010 download De minimis rule. Turbotax 2010 download   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. Turbotax 2010 download 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Turbotax 2010 download Debt instruments with de minimis OID are not listed in this publication. Turbotax 2010 download 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. Turbotax 2010 download Also, the de minimis rules generally do not apply to tax-exempt obligations. Turbotax 2010 download Example 2. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. Turbotax 2010 download Example 3. Turbotax 2010 download Assume the same facts as Example 2, except the debt instrument was issued at $950. Turbotax 2010 download You must report part of the $50 OID each year because it is more than $25. Turbotax 2010 download Choice to report all interest as OID. Turbotax 2010 download   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. Turbotax 2010 download See Constant yield method under Debt Instruments Issued After 1984, later, for more information. Turbotax 2010 download   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. Turbotax 2010 download For more information, see Regulations section 1. Turbotax 2010 download 1272-3. Turbotax 2010 download Purchase after date of original issue. Turbotax 2010 download   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. Turbotax 2010 download If so, the OID reported to you on Form 1099-OID may have to be adjusted. Turbotax 2010 download For more information, see Showing an OID adjustment under How To Report OID, later. Turbotax 2010 download The following rules generally do not apply to contingent payment debt instruments. Turbotax 2010 download Adjustment for premium. Turbotax 2010 download   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. Turbotax 2010 download Your adjustment is the total OID shown on your Form 1099-OID. Turbotax 2010 download Adjustment for acquisition premium. Turbotax 2010 download   If your debt instrument has acquisition premium, reduce the OID you report. Turbotax 2010 download 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. Turbotax 2010 download Adjustment for market discount. Turbotax 2010 download   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. Turbotax 2010 download Your adjustment is the accrued market discount for the year. Turbotax 2010 download 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. Turbotax 2010 download If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. Turbotax 2010 download The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. Turbotax 2010 download For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. Turbotax 2010 download 1275-7. Turbotax 2010 download Sale, exchange, or redemption. Turbotax 2010 download   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. Turbotax 2010 download If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. Turbotax 2010 download Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). Turbotax 2010 download   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. Turbotax 2010 download Your basis, generally, is your cost increased by the OID you have included in income each year you held it. Turbotax 2010 download 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. Turbotax 2010 download   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. Turbotax 2010 download Example 4. Turbotax 2010 download Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. Turbotax 2010 download 00 on November 1 of Year 1. Turbotax 2010 download The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. Turbotax 2010 download The debt instrument provides for semiannual payments of interest at 10%. Turbotax 2010 download Assume the debt instrument is a capital asset in Larry's hands. Turbotax 2010 download The debt instrument has $13,765. Turbotax 2010 download 00 of OID ($100,000 stated redemption price at maturity minus $86,235. Turbotax 2010 download 00 issue price). Turbotax 2010 download Larry sold the debt instrument for $90,000 on November 1 of Year 4. Turbotax 2010 download Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. Turbotax 2010 download 00 of OID in income and has increased his basis by that amount to $90,791. Turbotax 2010 download 00. Turbotax 2010 download Larry has realized a loss of $791. Turbotax 2010 download 00. Turbotax 2010 download All of Larry's loss is capital loss. Turbotax 2010 download 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. Turbotax 2010 download Form 1099-OID shows all OID income in box 1 except OID on a U. Turbotax 2010 download S. Turbotax 2010 download Treasury obligation, which is shown in box 8. Turbotax 2010 download It also shows, in box 2, any qualified stated interest you must include in income. Turbotax 2010 download (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. Turbotax 2010 download ) A copy of Form 1099-OID will be sent to the IRS. Turbotax 2010 download Do not attach your copy to your tax return. Turbotax 2010 download Keep it for your records. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download Form 1099-OID not received. Turbotax 2010 download   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. Turbotax 2010 download Refiguring OID. Turbotax 2010 download   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. Turbotax 2010 download You bought the debt instrument at a premium or at an acquisition premium. Turbotax 2010 download The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. Turbotax 2010 download S. Turbotax 2010 download Treasury securities). Turbotax 2010 download The debt instrument is a contingent payment or inflation-indexed debt instrument. Turbotax 2010 download See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. Turbotax 2010 download Refiguring interest. Turbotax 2010 download   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. Turbotax 2010 download Nominee. Turbotax 2010 download   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. Turbotax 2010 download ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. Turbotax 2010 download Show the owner of the debt instrument as the “recipient” and you as the “payer. Turbotax 2010 download ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. Turbotax 2010 download You must also give a copy of the Form 1099-OID to the actual owner. Turbotax 2010 download However, you are not required to file a nominee return to show amounts belonging to your spouse. Turbotax 2010 download See the Form 1099 instructions for more information. Turbotax 2010 download   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. Turbotax 2010 download 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. Turbotax 2010 download Form 1040 or Form 1040A required. Turbotax 2010 download   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. Turbotax 2010 download You received a Form 1099-OID as a nominee for the actual owner. Turbotax 2010 download Your total interest and OID income for the year was more than $1,500. Turbotax 2010 download Form 1040 required. Turbotax 2010 download   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. Turbotax 2010 download 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. Turbotax 2010 download Also, you must use Form 1040 if you were charged an early withdrawal penalty. Turbotax 2010 download Where to report. Turbotax 2010 download   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. Turbotax 2010 download Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. Turbotax 2010 download Also include any other OID and interest income for which you did not receive a Form 1099. Turbotax 2010 download Showing an OID adjustment. Turbotax 2010 download   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. Turbotax 2010 download   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. Turbotax 2010 download If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. Turbotax 2010 download Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Turbotax 2010 download Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. Turbotax 2010 download Subtract that OID from the subtotal and enter the result on line 2. Turbotax 2010 download If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. Turbotax 2010 download Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Turbotax 2010 download Below the subtotal, write “OID Adjustment” and show the additional OID. Turbotax 2010 download Add that OID to the subtotal and enter the result on line 2. Turbotax 2010 download 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. Turbotax 2010 download It also may depend on the type of the debt instrument. Turbotax 2010 download There are different rules for each of the following debt instruments. Turbotax 2010 download Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. Turbotax 2010 download Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. Turbotax 2010 download Debt instruments issued after July 1, 1982, and before 1985. Turbotax 2010 download Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). Turbotax 2010 download Contingent payment debt instruments issued after August 12, 1996. Turbotax 2010 download Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. Turbotax 2010 download Zero coupon bonds. Turbotax 2010 download   The rules for figuring OID on zero coupon bonds backed by U. Turbotax 2010 download S. Turbotax 2010 download Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. Turbotax 2010 download 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. Turbotax 2010 download The OID, which is taxed as ordinary income, generally equals the following amount. Turbotax 2010 download   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. Turbotax 2010 download If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. Turbotax 2010 download 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. Turbotax 2010 download For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. Turbotax 2010 download Your basis in the debt instrument is increased by the OID you include in income. Turbotax 2010 download Form 1099-OID. Turbotax 2010 download   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Turbotax 2010 download However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Turbotax 2010 download See Reduction for acquisition premium, later. Turbotax 2010 download 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. Turbotax 2010 download irs. Turbotax 2010 download gov/pub1212 by clicking the link under Recent Developments. Turbotax 2010 download Form 1099-OID not received. Turbotax 2010 download    The OID listed is for each $1,000 of redemption price. Turbotax 2010 download You must adjust the listed amount if your debt instrument has a different principal amount. Turbotax 2010 download For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Turbotax 2010 download   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. Turbotax 2010 download (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. Turbotax 2010 download ) If you did not hold the debt instrument the entire year, figure your OID using the following method. Turbotax 2010 download Divide the OID shown by 12. Turbotax 2010 download 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. Turbotax 2010 download This is the OID to include in income unless you paid an acquisition premium. Turbotax 2010 download The reduction for acquisition premium is discussed next. Turbotax 2010 download Reduction for acquisition premium. Turbotax 2010 download   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. Turbotax 2010 download 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. Turbotax 2010 download This is the monthly OID. Turbotax 2010 download Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. Turbotax 2010 download (If the result is zero or less, stop here. Turbotax 2010 download You did not pay an acquisition premium. Turbotax 2010 download ) 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. Turbotax 2010 download Subtract the amount figured in (3) from the amount figured in (1). Turbotax 2010 download This is the OID to include in income for each month you hold the debt instrument during the year. Turbotax 2010 download Transfers during the month. Turbotax 2010 download   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. Turbotax 2010 download Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. Turbotax 2010 download 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. Turbotax 2010 download For information about showing the correct OID on your tax return, see How To Report OID, earlier. Turbotax 2010 download Form 1099-OID. Turbotax 2010 download   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Turbotax 2010 download However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Turbotax 2010 download See Constant yield method and the discussions on acquisition premium that follow, later. Turbotax 2010 download 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. Turbotax 2010 download irs. Turbotax 2010 download gov/pub1212 by clicking the link under Recent Developments. Turbotax 2010 download Form 1099-OID not received. Turbotax 2010 download    The OID listed is for each $1,000 of redemption price. Turbotax 2010 download You must adjust the listed amount if your debt instrument has a different principal amount. Turbotax 2010 download For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Turbotax 2010 download   If you held the debt instrument the entire year, use the OID shown in Section I-A. Turbotax 2010 download (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. Turbotax 2010 download ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. Turbotax 2010 download Method 1. Turbotax 2010 download    Divide the total OID for a calendar year by 365 (366 for leap years). Turbotax 2010 download Multiply the result in (1) by the number of days you held the debt instrument during that particular year. Turbotax 2010 download  This computation is an approximation and may result in a slightly higher OID than Method 2. Turbotax 2010 download Method 2. Turbotax 2010 download    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. Turbotax 2010 download (See Accrual period under Constant yield method, next. Turbotax 2010 download ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Turbotax 2010 download If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. Turbotax 2010 download Add the results of (2) and (3). Turbotax 2010 download This is the OID to include in income, unless you paid an acquisition premium. Turbotax 2010 download (The reduction for acquisition premium is discussed later. Turbotax 2010 download ) Constant yield method. Turbotax 2010 download   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. Turbotax 2010 download OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Turbotax 2010 download   Figure the OID allocable to any accrual period as follows. Turbotax 2010 download Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. Turbotax 2010 download Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Turbotax 2010 download Accrual period. Turbotax 2010 download   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. Turbotax 2010 download Your tax year will usually include parts of two accrual periods. Turbotax 2010 download Daily OID. Turbotax 2010 download   The OID for any accrual period is allocated equally to each day in the accrual period. Turbotax 2010 download You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. Turbotax 2010 download If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. Turbotax 2010 download Figuring daily OID. Turbotax 2010 download   The daily OID for the initial accrual period is figured using the following formula. Turbotax 2010 download   (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. Turbotax 2010 download Reduction for acquisition premium on debt instruments purchased before July 19, 1984. Turbotax 2010 download   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. Turbotax 2010 download 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. Turbotax 2010 download Reduction for acquisition premium on debt instruments purchased after July 18, 1984. Turbotax 2010 download   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. Turbotax 2010 download However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. Turbotax 2010 download To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. Turbotax 2010 download The numerator is the acquisition premium. Turbotax 2010 download The denominator is the total OID remaining for the debt instrument after your purchase date. Turbotax 2010 download Section I-A is available at www. Turbotax 2010 download irs. Turbotax 2010 download gov/pub1212 and clicking the link under Recent Developments. Turbotax 2010 download Using Section I-A to figure accumulated OID. Turbotax 2010 download   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. Turbotax 2010 download The amount from the “Total OID to January 1, YYYY” column for your debt instrument. Turbotax 2010 download The OID from January 1 of a calendar year to the date of purchase, figured as follows. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download Add the amounts figured in (2a) and (2b). Turbotax 2010 download 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. Turbotax 2010 download You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. Turbotax 2010 download Your basis in the debt instrument is increased by the OID you include in income. Turbotax 2010 download For information about showing the correct OID on your tax return, see How To Report OID, earlier. Turbotax 2010 download Form 1099-OID. Turbotax 2010 download   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. Turbotax 2010 download However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Turbotax 2010 download See Constant yield method and Reduction for acquisition premium, later. Turbotax 2010 download   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. Turbotax 2010 download See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. Turbotax 2010 download 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. Turbotax 2010 download irs. Turbotax 2010 download gov/pub1212 by clicking the link under Recent Developments. Turbotax 2010 download Form 1099-OID not received. Turbotax 2010 download   The OID listed is for each $1,000 of redemption price. Turbotax 2010 download You must adjust the listed amount if your debt instrument has a different principal amount. Turbotax 2010 download For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Turbotax 2010 download   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. Turbotax 2010 download (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. Turbotax 2010 download ) If you did not hold the debt instrument the entire year, figure your OID as follows. Turbotax 2010 download Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. Turbotax 2010 download (See Accrual period under Constant yield method, later. Turbotax 2010 download ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Turbotax 2010 download Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. Turbotax 2010 download Add the results of (2) and (3). Turbotax 2010 download This is the OID to include in income for that year, unless you paid an acquisition premium. Turbotax 2010 download (The reduction for acquisition premium is discussed later. Turbotax 2010 download ) Tax-exempt bond. Turbotax 2010 download   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. Turbotax 2010 download You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. Turbotax 2010 download In general, use the rules that follow to determine your OID. Turbotax 2010 download Constant yield method. Turbotax 2010 download   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. Turbotax 2010 download (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. Turbotax 2010 download ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Turbotax 2010 download   Figure the OID allocable to any accrual period as follows. Turbotax 2010 download Multiply the adjusted issue price at the beginning of the accrual period by a fraction. Turbotax 2010 download The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. Turbotax 2010 download The yield must be stated appropriately taking into account the length of the particular accrual period. Turbotax 2010 download Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Turbotax 2010 download Accrual period. Turbotax 2010 download   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. Turbotax 2010 download For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. Turbotax 2010 download Any short period is included as the first accrual period. Turbotax 2010 download   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. Turbotax 2010 download However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. Turbotax 2010 download Daily OID. Turbotax 2010 download   The OID for any accrual period is allocated equally to each day in the accrual period. Turbotax 2010 download Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download Figuring daily OID. Turbotax 2010 download   The daily OID for the initial accrual period is figured using the following formula. Turbotax 2010 download   (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. Turbotax 2010 download Example 5. Turbotax 2010 download On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. Turbotax 2010 download 17. Turbotax 2010 download According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. Turbotax 2010 download The yield to maturity is 12%, compounded semiannually. Turbotax 2010 download The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. Turbotax 2010 download The accrual periods are the 6-month periods ending on each of these dates. Turbotax 2010 download The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). Turbotax 2010 download The daily OID for the first accrual period is figured as follows. Turbotax 2010 download   ($86,235. Turbotax 2010 download 17 x . Turbotax 2010 download 12/2) – $5,000     181 days     = $174. Turbotax 2010 download 11020 = $. Turbotax 2010 download 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. Turbotax 2010 download 17 + $174. Turbotax 2010 download 11), or $86,409. Turbotax 2010 download 28. Turbotax 2010 download The number of days for the second accrual period (July 1 through December 31) is 184 days. Turbotax 2010 download The daily OID for the second accrual period is figured as follows. Turbotax 2010 download   ($86,409. Turbotax 2010 download 28 x . Turbotax 2010 download 12/2) – $5,000     184 days     = $184. Turbotax 2010 download 55681 = $1. Turbotax 2010 download 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, $174. Turbotax 2010 download 11 ($. Turbotax 2010 download 95665 × 182 days) plus $184. Turbotax 2010 download 56 ($1. Turbotax 2010 download 00303 × 184 days), or $358. Turbotax 2010 download 67. Turbotax 2010 download Add the OID to the $10,000 interest you report on your income tax return for Year 1. Turbotax 2010 download Example 6. Turbotax 2010 download 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. Turbotax 2010 download Also, the interest payment dates are October 31 and April 30 of each calendar year. Turbotax 2010 download The accrual periods are the 6-month periods ending on each of these dates. Turbotax 2010 download The number of days for the first accrual period (May 1 through October 31) is 184 days. Turbotax 2010 download The daily OID for the first accrual period is figured as follows. Turbotax 2010 download   ($86,235. Turbotax 2010 download 17 x . Turbotax 2010 download 12/2) – $5,000     184 days     = $174. Turbotax 2010 download 11020 = $. Turbotax 2010 download 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). Turbotax 2010 download The daily OID for the second accrual period is figured as follows. Turbotax 2010 download   ($86,409. Turbotax 2010 download 28 x . Turbotax 2010 download 12/2) – $5,000     181 days     = $184. Turbotax 2010 download 55681 = $1. Turbotax 2010 download 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. Turbotax 2010 download 31 of OID in income. Turbotax 2010 download This is $174. Turbotax 2010 download 11 ($. Turbotax 2010 download 94625 × 184 days) for the period May 1 through October 31 plus $62. Turbotax 2010 download 20 ($1. Turbotax 2010 download 01965 × 61 days) for the period November 1 through December 31. Turbotax 2010 download The OID is added to the $5,000 interest income paid on October 31 of Year 1. Turbotax 2010 download Your basis in the debt instrument is increased by the OID you include in income. Turbotax 2010 download On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. Turbotax 2010 download 48 ($86,235. Turbotax 2010 download 17 + $236. Turbotax 2010 download 31). Turbotax 2010 download Short first accrual period. Turbotax 2010 download   You may have to make adjustments if a debt instrument has a short first accrual period. Turbotax 2010 download 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. Turbotax 2010 download (The remaining accrual periods begin on May 1 and November 1. Turbotax 2010 download ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. Turbotax 2010 download You may use any reasonable compounding method in determining OID for a short period. Turbotax 2010 download Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). Turbotax 2010 download Consult your tax advisor for more information about making this computation. Turbotax 2010 download   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. Turbotax 2010 download Reduction for acquisition premium. Turbotax 2010 download   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. Turbotax 2010 download To figure the daily acquisition premium, multiply the daily OID by the following fraction. Turbotax 2010 download The numerator is the acquisition premium. Turbotax 2010 download The denominator is the total OID remaining for the debt instrument after your purchase date. Turbotax 2010 download Example 7. Turbotax 2010 download 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. Turbotax 2010 download The adjusted issue price on November 1 of Year 1 is $86,409. Turbotax 2010 download 28 ($86,235. Turbotax 2010 download 17 + $174. Turbotax 2010 download 11). Turbotax 2010 download In this case, you paid an acquisition premium of $590. Turbotax 2010 download 72 ($87,000 − $86,409. Turbotax 2010 download 28). Turbotax 2010 download The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. Turbotax 2010 download 1) Daily OID on date of purchase (2nd accrual period) $1. Turbotax 2010 download 01965*  2)  Acquisition premium $590. Turbotax 2010 download 72    3)  Total OID remaining after purchase date ($13,764. Turbotax 2010 download 83 − $174. Turbotax 2010 download 11) 13,590. Turbotax 2010 download 72   4) Line 2 ÷ line 3 . Turbotax 2010 download 04346  5)  Line 1 × line 4 . Turbotax 2010 download 04432  6)  Daily OID reduced for the acquisition premium. Turbotax 2010 download Line 1 − line 5 $0. Turbotax 2010 download 97533  * As shown in Example 6. Turbotax 2010 download The total OID to include in income for Year 1 is $59. Turbotax 2010 download 50 ($. Turbotax 2010 download 97533 × 61 days). Turbotax 2010 download 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. Turbotax 2010 download In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. Turbotax 2010 download If you hold a contingent payment bond, you must report OID as it accrues each year. Turbotax 2010 download 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. Turbotax 2010 download To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. Turbotax 2010 download Noncontingent bond method. Turbotax 2010 download    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. Turbotax 2010 download In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. Turbotax 2010 download When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. Turbotax 2010 download If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. Turbotax 2010 download If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. Turbotax 2010 download Form 1099-OID. Turbotax 2010 download   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. Turbotax 2010 download For example, the amount may not be correct if the contingent payment was different from the projected amount. Turbotax 2010 download If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. Turbotax 2010 download For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. Turbotax 2010 download Figuring OID. Turbotax 2010 download   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. Turbotax 2010 download The issuer must make these available to you. Turbotax 2010 download Comparable yield. Turbotax 2010 download   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. Turbotax 2010 download The comparable yield is determined as of the debt instrument's issue date. Turbotax 2010 download Projected payment schedule. Turbotax 2010 download   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. Turbotax 2010 download The projected payment schedule is created by the issuer as of the debt instrument's issue date. Turbotax 2010 download It is used to determine the issuer's and holder's interest accruals and adjustments. Turbotax 2010 download Steps for figuring OID. Turbotax 2010 download   Figure the OID on a contingent payment debt instrument in two steps. Turbotax 2010 download Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. Turbotax 2010 download Use the comparable yield as the yield to maturity. Turbotax 2010 download 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). Turbotax 2010 download Do not treat any amount payable as qualified stated interest. Turbotax 2010 download Adjust the OID in (1) to account for actual contingent payments. Turbotax 2010 download If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. Turbotax 2010 download If the contingent payment is less than the projected fixed amount, you have a negative adjustment. Turbotax 2010 download Net positive adjustment. Turbotax 2010 download   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. Turbotax 2010 download Treat a net positive adjustment as additional OID for the tax year. Turbotax 2010 download Net negative adjustment. Turbotax 2010 download   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. Turbotax 2010 download Use a net negative adjustment to offset OID on the debt instrument for the tax year. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download 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. Turbotax 2010 download Basis adjustments. Turbotax 2010 download   In general, increase your basis in a contingent payment debt instrument by the OID included in income. Turbotax 2010 download Your basis, however, is not affected by any negative or positive adjustments. Turbotax 2010 download Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. Turbotax 2010 download Treatment of gain or loss on sale or exchange. Turbotax 2010 download   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. Turbotax 2010 download 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. Turbotax 2010 download If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. Turbotax 2010 download See Regulations section 1. Turbotax 2010 download 1275-4 for exceptions to these rules. Turbotax 2010 download Premium, acquisition premium, and market discount. Turbotax 2010 download   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. Turbotax 2010 download See Regulations section 1. Turbotax 2010 download 1275-4 to determine how to account for these items. Turbotax 2010 download Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. Turbotax 2010 download An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d