depends on the type of bond and how it was issued and
acquired. big difference for bonds that pay taxable vs.
tax-exempt (municipal) interest. Bond Premium Amortization

If you pay a premium to buy a bond, the premium is part of
your basis in the bond. If the bond yields taxable interest,
you can choose to amortize the premium. This generally means
that each year, over the life of the bond, you use a part of
the premium to reduce the amount of interest includible in
your income. If you make this choice, you must reduce your
basis in the bond by the amortization for the year.

If the bond yields tax-exempt interest, you must amortize
the premium. This amortized amount is not deductible in
determining taxable income. However, each year you must
reduce your basis in the bond by the amortization for the
year.

Bond premium. Bond premium is the amount by which your
basis in the bond right after you get it is more than the
total of all amounts payable on the bond after you get it
(other than payments of qualified stated interest). For
example, a bond with a maturity value of $1,000 generally
would have a $50 premium if you buy it for $1050.

Basis. In general, your basis for figuring bond premium
amortization is the same as your basis for figuring any loss
on the sale of the bond. However, you may need to use a
different basis for:

a.. Convertible bonds,

b.. Bonds you got in a trade, and

c.. Bonds whose basis has to be determined using the basis
of the person who transferred the bond to you.

See section 1.171-1(e) of the regulations.

also, http://www.irs.gov/pub/irs-pdf/p550.pdf

--

thistaglineiscompressedusingadvancedtechnologies

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"Joe C" <no-more-spam[at]no-spam.com> wrote:

- quote -

You are correct, you can claim the difference as a capital loss.

Larry

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Joe C <no-more-spam[at]no-spam.com> wrote:

- quote -

If this is a taxable bond (corporate or Federal) you're
considering, then you have two options: amortize the premium
over the life of the bond, or take a capital loss at
maturity. It's usually better to amortize, because the
amortization offsets the bond income.

If this is a tax-exempt bond, then you have to amortize, and
the amortization offsets tax-exempt interest, giving you no
tax benefit, and no capital loss when the bond matures.

--
Chris Green

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Joe C wrote:

- quote -

If the bond is non-taxable, the answer is no.
http://www.investinginbonds.com/info/taxarticle.htm

If the bond is taxable, and if you paid tax on the
un-adjusted interest as you went along, yes. You could have
elected to do a lot of math and to declare less interest
each year.

This is my non-pro assessment of the IRS Publication 550 in
the section called Bond Premium Amortization.

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"Joe C" <no-more-spam[at]no-spam.com> wrote:

- quote -

When you buy a bond at a premium, you have to amortize it
over the remaining life of the bond. Therefore, if held to
maturity, there is no loss to deduct.

--
<<< Benjamin Yazersky CPA [NJ & NY] > >
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Joe C <no-more-spam[at]no-spam.com> wrote:

- quote -

If it pays a coupon, you're supposed to accrete the price
difference over the bond's life and subtracting it from the
coupon. (If the accretion is greater than the coupon I
don't know if you deduct it annually or at the end.)

Seth

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If I buy a bond and pay over par, then I hold it to
maturity, is there any reason I can't claim the difference
as a loss? (I know there is a $3000 limitation).

Thanks,
Joe

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