In article <819377b5-fe4f-4b38-a1f0-c80f3b5f4887[at]v1g2000pra.googlegroups.com> ,
removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:
- quote -


It affects EIC (counts as investment income.) It also could cause
Medicare Premiums to increase.
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ArtKamlet at a o l dot c o m Columbus OH K2PZH

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On Jul 1, 12:13 pm, MyVeryOwnSelf <s...[at]emailNot.nul> wrote:

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Line 8b (tax-exempt interest) affects the taxable portion of social
security. Maybe it affects other things too, even those not tax
related such as qualification for federal college loans.

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- quote -

One possibility if you have Excel:
http://office.microsoft.com/en-us/te...421081033.aspx

The tricky part is determining the "effective rate." You can use Excel's
"Goal Seek" to make the final "carrying amount" equal to the "face value"
by changing the "effective rate."

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In misc.taxes.moderated, MyVeryOwnSelf wrote:

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Figuring out the amortization numbers would be hard for me, so that
would be a disadvantage. Now if there were a bond tracking program
that was expert at doing this, that would be interesting.

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I believe it could be either LTCG or STCG, depending on how long the bond
was held. (With the interest rates these days, lots of people are buying
short-term paper.)


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But according to IRS publication 550:

"You can change your decision to amortize bond premium only with the
written approval of the IRS. To request approval, use Form 3115,
Application for Change in Accounting Method."

I’m thinking of doing this. Anybody have advice?

Amortizing has two advantages: (1) get the benefit sooner rather than
later, and (2) offset ordinary income rather than LTCG (if held more than a
year). But I've found the record-keeping to be burdensome. So I'm thinking
of switching back. To keep it simple, I'd switch at a time when there are
no amortizing taxable bonds in the portfolio.

Have any of you out there done this, or know about somebody who has?

Are there any downsides other than losing the two advantages? How does the
IRS typically respond to requests like this? Would it tend to draw an
(eek!) audit?


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I'm guessing you mean "basis of $100" so the gain is Zero.

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In article <9daa24e6-9ceb-4050-a559-a9102135b898[at]m45g2000hsb.googlegroups.com> ,
ed <edcosoft[at]sbcglobal.net> wrote:
- quote -




I though only the premium ($5) was amortized, so basis would
be face value if held to redemption.

- quote -


Why not reduce line 8b?
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ArtKamlet at a o l dot c o m Columbus OH K2PZH

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On Jul 1, 4:32*pm, "removeps-gro...[at]yahoo.com" <removeps-
gro...[at]yahoo.com> wrote:
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First, an apology. I cn't believe I was awake when I posted that.
Ignore it.

To go on, however, i fyou don't amortize the loss is LTCL at
maturity. If you DO amortize read the instructions in PUB 550 which,
esentially, subtrats it from current income (which is a better deal
than the LTCL at maturity. Note it is a "all bonds" and "forever"
choice.. Yo ur1099 B will show total proceeds, so you show basis of
Zero if you amortized, or $105 if not.

Do not adjust line 8b when amortizing a tax free bond premium, just
reduce your basis, and don't bother ir you don't sell before maturity,
which is important if you are drawing Social Security and have some
other esoteric problems.

ed

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On Jun 30, 11:42*am, Harlan Lunsford <hlunsf...[at]bellsouth.net> wrote:
- quote -

But when you hold a bond till maturity, does the 1099-B show the
proceeds? Say you bought 10 bonds with a face value of 10k and held
them to maturity. Does the 1099-B show proceeds of 10k? I don't
remember mines showing it.

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- quote -

Yes: "ABP Adjustment," one negative number, for all bonds combined, in a
line at the end of Schedule B.


- quote -

Presumably, yes. But (IMO) line 8b almost never affects the tax due, so one
might argue it's pointless to do the amortization calculation unless the
bond is sold before maturity (in which case, amortization reduces the basis
but not all the way to the face value, and there may be a capital gain or
loss).


(Disclaimer: I'm not a tax pro.)

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In article <c1sak.87125$102.29747[at]bgtnsc05-news.ops.worldnet.att.net> ,
Gil Faver <rowdy'sboss[at]xxyz.com> wrote:
- quote -


How is the amortization shown? As a reduction of Schedule B interest?
If a muni bond, reduction of line 8b?

Not on a 4797 I hope?
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ArtKamlet at a o l dot c o m Columbus OH K2PZH

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"ed" <edcosoft[at]sbcglobal.net> wrote in message
news:c43c8a76-c45b-43c7-8d09-e617176ce7d3[at]r66g2000hsg.googlegroups.com...
- quote -


Thanks. Pub 550 says for taxable bonds you can elect to amortize the
premium (so I guess if you don't elect this, it is LTCL); it says for
tax-exempts, you MUST amortize the premium.

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On Jun 30, 4:16*pm, MyVeryOwnSelf <s...[at]emailNot.nul> wrote:
- quote -

life of the bond, leaving the basis of the bond when redeemed, PAR.
So you have no loss this year. Sorry. Look at publication 550 to
see what you might do, but it is NOT a LTCL.
If it was a tax free bond, it's still PAR but you coundn't have gotten
any dedcution over the years. See Pub 550.

DON"t buy premium tax frees.

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- quote -

OTOH, if the bond's interest is tax-exempt -- if it's a municipal bond --
then there's no capital loss to report. The "loss" gets eaten up by
amortization; there's no tax benefit at maturity.

Reference: IRS pub 550...

"If the bond yields tax-exempt interest, you must amortize the premium. ...
each year you must reduce your basis in the bond ... by the amortization
for the year."

[The "premium" is the extra $5 you paid.]

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"Harlan Lunsford" <hlunsford[at]bellsouth.net> wrote in message
news:SM9ak.9531$NQ5.3790[at]bignews6.bellsouth.net...
- quote -

so, is that limited to $3,000 beyond capital gains? So, if I already have a
bunch of capital losses I am carrying forward, not a good idea to buy above
par?

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Gil Faver wrote:
- quote -

Capital loss, schedule d.

ChEAr$,
Harlan Lunsford, EA n LA

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if I buy a bond at $105, what happens on my tax return at maturity when I
receive my $100 par value back? Do I show $5 of negative interest?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >