Shagnasty <shag[at]nospam.com> wrote:

- quote -

I have a question: if one purchases and holds the bond
within a brokerage account, does the interest attributable
to market discount/premium get included in the amounts shown
on the 1099B?

Second question: for a bond that trades close to par value,
can one assume the bond was issued at a price of 100 or
does one need to go back and find out what it actually
was priced at when issued?

Steve

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"meander100" <meander100[at]carolina.rr.com> wrote:

- quote -

Read publication 1212. It has a group of formulas along
with other methods.

You would use a 'constant percentage' factor that would
result in the discount being recognized each year in amounts
that would ultimately total the diffference between maturity
value and purchase price.

Each year's income would be reported. If the bond was not
purchased at the issue price, then the discount or premium
should be added or deducted from the taxable amount.

--
Atticus Thomas, CPA
9112 Shore Crest Dr
Cedar Hill, TX 75104-6927
Tel 972-293-1139
Fax 972-767-0907

<< ================================================== ===== > << 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. > << ================================================== ===== >

meander100 <meander100[at]carolina.rr.com> wrote:

- quote -

I would say if it's a deep discount bond you would report
income based on the interval through 12/31/2005.

I'm unclear though how deep the discount needs to be before
you need to do this at all. Is there a formula for this?

Steve

<< ================================================== ===== > << 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. > << ================================================== ===== >

I purchased a 10yr T-note at market discount Sept 15 2005.

Pub 550 confused things a bit...

Questions:

1. I believe I should use the "constant yield" method of
accreting the discount. Is this correct?

2. Assuming I have a correct amortization schedule for this
bond, when do I recognize the accretion income? (Paydates
are 5/15, 11/15). Do I report accretion income for the
period 09/15/2005 through 12/31/2005, or just 09/15/2005
until Paydate 11/15/2005? In other words, does the
accretion income get reported in a lump sum on the paydates
like the interest payment, or is it essentially recognized
daily? I am cash basis.

Thank you!!!

<< ================================================== ===== > << 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. > << ================================================== ===== >