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Reporting of Bond premium on noncovered security
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jo
Mar 9, 2015, 6:15:04 PM3/9/15
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My 1099-int lists a bond premium for a covered security in box 11, and I can match it with the security in the details that follow.
Within these pages of details they also list a bond premium for a noncovered security. Where in Turbo Tax, either in the interview or the forms mode, with which I'm comfortable, can this be entered? Am I correct that this is an offset to the interest I receive from this bond and that finding a spot for it would benefit me, however little?
There was an suggestion on the TTAX forum that this be entered deep down in the Schedule A for Other deductions, as an investment expense. This doesn't seem right.
jo
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Within these pages of details they also list a bond premium for a noncovered security. Where in Turbo Tax, either in the interview or the forms mode, with which I'm comfortable, can this be entered? Am I correct that this is an offset to the interest I receive from this bond and that finding a spot for it would benefit me, however little?
There was an suggestion on the TTAX forum that this be entered deep down in the Schedule A for Other deductions, as an investment expense. This doesn't seem right.
jo
--
<< ------------------------------------------------------- >>
<< 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 (2011) - All rights reserved. >>
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John Beurket
Mar 10, 2015, 11:01:32 AM3/10/15
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On 03/09/15 6:13 PM, jo wrote:
> My 1099-int lists a bond premium for a covered security in box 11,
> and I can match it with the security in the details that follow.
>
> Within these pages of details they also list a bond premium for a
> noncovered security. Where in Turbo Tax, either in the interview or
> the forms mode, with which I'm comfortable, can this be entered?
> Am I correct that this is an offset to the interest I receive from
> this bond and that finding a spot for it would benefit me, however little?
The adjustment for Bond Interest has been in TTAX and HRBLOCH for as
> My 1099-int lists a bond premium for a covered security in box 11,
> and I can match it with the security in the details that follow.
>
> Within these pages of details they also list a bond premium for a
> noncovered security. Where in Turbo Tax, either in the interview or
> the forms mode, with which I'm comfortable, can this be entered?
> Am I correct that this is an offset to the interest I receive from
> this bond and that finding a spot for it would benefit me, however little?
long as i have been using them. And for the last several years I have
been computing the amortization and reporting it there. If I add the
amortization for the non covered bonds to the amount reported for
covered bonds I am concerned that the IRS will raise a flag. I have yet
to decide what to do. Since my bonds are tax free the consequences of
not declaring the reduction in income are minimum.
JB
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lotax
Mar 10, 2015, 6:25:03 PM3/10/15
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John B. says "Since my bonds are tax free the consequences of not declaring the reduction in income are minimum."
I'm pretty sure that IRS rules *prohibit* the "reduction" that he seems to be referring to. It's not a choice for tax-exempt bonds.
The rules are all there in the IRS publication, but I can't remember the pub number.
I'm pretty sure that IRS rules *prohibit* the "reduction" that he seems to be referring to. It's not a choice for tax-exempt bonds.
The rules are all there in the IRS publication, but I can't remember the pub number.
John Beurket
Mar 11, 2015, 11:45:03 AM3/11/15
to
On 03/10/15 6:19 PM, lotax wrote:
> I'm pretty sure that IRS rules*prohibit* the "reduction" that he seems to be
loss of capital which cannot be declared for tax free bonds which is
what is prohibited, not the reduction of declared income.
> I'm pretty sure that IRS rules*prohibit* the "reduction" that he seems to be
> referring to. It's not a choice for tax-exempt bonds.
Tax free income IS reduced over the life of the bond to compensate for
loss of capital which cannot be declared for tax free bonds which is
what is prohibited, not the reduction of declared income.
lotax
Mar 11, 2015, 7:20:03 PM3/11/15
to
JB, I'm sure we're saying the same thing in different words.
Taxable income is never to be reduced by the amortization of a premium paid for exempt bonds, even though the premium is required to be amortized over the life of the exempt bond.
Taxable income is never to be reduced by the amortization of a premium paid for exempt bonds, even though the premium is required to be amortized over the life of the exempt bond.
zvkmpw
Mar 15, 2015, 10:30:04 PM3/15/15
to
> My 1099-int lists a bond premium for a covered security in
> box 11, and I can match it with the security in the details
> that follow.
>
> Within these pages of details they also list a bond premium
> for a noncovered security. Where in Turbo Tax, ...
> box 11, and I can match it with the security in the details
> that follow.
>
> Within these pages of details they also list a bond premium
> can this be entered? Am I correct that this is an offset to
> the interest I receive from this bond and that finding a spot
> for it would benefit me, however little?
You didn't indicate, but I'm assuming it's all taxable interest.
> the interest I receive from this bond and that finding a spot
> for it would benefit me, however little?
In TurboTax's "Interest Income Summary" sheet, click on "Edit" for the payer.
This displays a page to enter the 1099-INT amounts.
Then click "Continue" to get to the next page. It has four check boxes.
Check "I need to adjust the amount" and "Continue"
In the next page,
- enter the NON-covered premium amount as a positive number, and
- click "I amortized a premium," and
- "Continue"
In Schedule B, you should see under "ABP Adjustment" the negative of the sum of
- Form 1099-INT box 11, and
- the NON-covered adjustment you entered.
As you mention, this will benefit you a little this year. However, the bonds' basis is reduced correspondingly, so you won't report a loss at maturity. My attitude is a benefit now is better than one later. Also, reducing ordinary income is more helpful than reducing capital gains.
Please refer to "Choosing to Amortize" in IRS Publication 550 [2014], page 35 for some reporting details.
Hope this helps.
[Disclaimer: I'm not a tax professional; just an ordinary TurboTax user.]
John Beurket
Mar 16, 2015, 11:30:06 AM3/16/15
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On 03/15/15 10:26 PM, zvkmpw wrote:
> In Schedule B, you should see under "ABP Adjustment" the negative of the sum of
> - Form 1099-INT box 11, and
> - the NON-covered adjustment you entered.
> ...
> In Schedule B, you should see under "ABP Adjustment" the negative of the sum of
> - Form 1099-INT box 11, and
> - the NON-covered adjustment you entered.
> Please refer to "Choosing to Amortize" in IRS Publication 550 [2014],
> page 35 for some reporting details.
Thank you for you input, but I was looking for some official statement
> page 35 for some reporting details.
on the 1099-INT form. It was not mentioned in PUB 550. The bonds happen
to be Tax Free, for which amortization is required.
JB
Message has been deleted
zvkmpw
Mar 16, 2015, 8:55:02 PM3/16/15
to
> ... The bonds happen
>From IRS Pub 550 [2014] pg 34: "If the bond yields tax-exempt interest ... you must reduce ... tax-exempt interest otherwise reportable on Form 1040, line 8b by the amortization."
> to be Tax Free, for which amortization is required.
For tax-exempt bonds, the amortized-premium adjustment ought to enter into calculation of Form 1040 line 8b, not into Schedule B. As "lotax" wrote, "Taxable income is never to be reduced by the amortization of a premium paid for exempt bonds"
>From IRS Pub 550 [2014] pg 34: "If the bond yields tax-exempt interest ... you must reduce ... tax-exempt interest otherwise reportable on Form 1040, line 8b by the amortization."
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