Rich Carreiro <rlcarr[at]animato.arlington.ma.us> wrote:
- quote -

Consider a zero muni callable beginning 5 years before
maturity at 104% of face.

Original OID should be calculated to first redemption date
an dvalue.

But there sure could be an acquisition premium.

--
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"SteveJ" <SteveJnot.really[at]yahoo.com> writes:

- quote -

1) There's no acquisition premium on zeros. How can
there be? A zero will always sell for less than par.
2) There will be OID, and that OID has to be calculated
and included in line 8b of 1040 ("Tax-exempt interest").
3) Further, you need to compute the effective yield you
are experiencing (based on your purchase price) and
compare that to the yield of the muni zero when it
was issued. If your yield is greater, the difference
between the yields is TAXABLE interest. In other
words, if you got a yield "bonus" due to market
action (i.e. interest rates rising since the muni
zero was issued), that bonus is taxable.

See IRS Pub 1212.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Comments?

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