OSPAM[at]joinme.com wrote:

- quote -

No way other than selling the bonds or if the debt becomes
totally worhtless. I wish there was.

See FSA 1992-0902-2 which does a fairly complete job of
discussing the rules under 1272 et al.

Drew Edmundson, CPA
Cary, NC

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

In 2004 I purchased some bonds in default. In January of
2005 and January of 2006, I received a 1099-OID from my
broker for the tax years 2004 and 2005, respectively. I
have never received any interest from the bonds because they
are in default. Moreover, it now appears likely that I
never will receive anything. Do I have to keep paying tax
on this phantom interest? Is there any way out of this
predicament other than selling the bonds? Also, when I sell
the bonds at a loss, I assume I can add the OID I paid to my
basis, but does that mean that I am taxed on the OID
currently as ordinary income, but only get to deduct it in
the future as part of a long-term capital loss?

Replace NOSPAM by eeyore when responding by email.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >