Negative OID Interest
roggo
attributable to 'gain' in value for Treasury-Protected Securities
(TIPS). Normally I would report this as interest income on Schedule
B.
However due to negative Cost of Living Allowance (COLA) in 2009, the
1099-OID reflects a negative amount. Can I put a negative amout on
Schedule B? I did not sell anything so obviously it wouldn't go on
Schedule D. And the 'fixed' interest of the TIP would be still be
reported on Schedule B.
Thanks.
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D. Stussy
news:cf826e39-f733-4a92...@g25g2000yqd.googlegroups.com...
> Just received Form 1099-OID from Dept of Treasury for interest
> attributable to 'gain' in value for Treasury-Protected Securities
> (TIPS). Normally I would report this as interest income on Schedule
> B.
> However due to negative Cost of Living Allowance (COLA) in 2009, the
> 1099-OID reflects a negative amount. Can I put a negative amout on
> Schedule B? I did not sell anything so obviously it wouldn't go on
> Schedule D. And the 'fixed' interest of the TIP would be still be
> reported on Schedule B.
> Thanks.
I don't see how original issue discount can be "negative interest."
If the discount is negative, it's actually a liability you incurred in your
purchase, so it should increase the basis of the affected security.
Wallace
"D. Stussy" <spam+ne...@bde-arc.ampr.org> wrote in message
news:hiu0vk$6v3$1...@snarked.org...
> "roggo" <ro...@att.net> wrote in message
> news:cf826e39-f733-4a92...@g25g2000yqd.googlegroups.com...
>> Just received Form 1099-OID from Dept of Treasury for interest
>> attributable to 'gain' in value for Treasury-Protected Securities
>> (TIPS). Normally I would report this as interest income on Schedule
>> B.
>> However due to negative Cost of Living Allowance (COLA) in 2009, the
>> 1099-OID reflects a negative amount. Can I put a negative amout on
>> Schedule B? I did not sell anything so obviously it wouldn't go on
>> Schedule D. And the 'fixed' interest of the TIP would be still be
>> reported on Schedule B.
>> Thanks.
>
> I don't see how original issue discount can be "negative interest."
>
> If the discount is negative, it's actually a liability you incurred in
> your
> purchase, so it should increase the basis of the affected security.
from the IRS http://www.irs.gov/publications/p1212/ar02.html
Steps for figuring OID. Figure the OID on a contingent payment debt
instrument in two steps.
1.. Figure the OID using the constant yield method (discussed earlier
under Debt Instruments Issued After 1984 ) that applies to fixed payment
debt instruments. Use the comparable yield as the yield to maturity. In
general, use the projected payment schedule to determine the instrument's
adjusted issue price at the beginning of each accrual period (other than the
initial period). Do not treat any amount payable as qualified stated
interest.
2.. Adjust the OID in (1) to account for actual contingent payments. If
the contingent payment is greater than the projected fixed amount, you have
a positive adjustment. If the contingent payment is less than the projected
fixed amount, you have a negative adjustment.
Net positive adjustment. A net positive adjustment exists for a tax year
when the total of any positive adjustments described in (2) above for the
tax year is more than the total of any negative adjustments for the tax
year. Treat a net positive adjustment as additional OID for the tax year.
Net negative adjustment. A net negative adjustment exists for a tax year
when the total of any negative adjustments described in (2) above for the
tax year is more than the total of any positive adjustments for the tax
year. Use a net negative adjustment to offset OID on the debt instrument for
the tax year. If the net negative adjustment is more than the OID on the
debt instrument for the tax year, you can claim the difference as an
ordinary loss. However, the amount you can claim as an ordinary loss is
limited to the OID on the debt instrument you included in income in prior
tax years. You must carry forward any net negative adjustment that is more
than the total OID for the tax year and prior tax years and treat it as a
negative adjustment in the next tax year.
Basis adjustments. In general, increase your basis in a contingent payment
debt instrument by the OID included in income. Your basis, however, is not
affected by any negative or positive adjustments. Decrease your basis by any
noncontingent payment received and the projected contingent payment
scheduled to be received.