Publication 1212 (Rev. January 2018) P1212

User Manual: 1212

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Contents
Future Developments
Photographs of Missing Children
Introduction
Definitions
Debt Instruments on the OID List
Debt Instruments Not on the OID List
Information for Brokers and Other Middlemen
Information for Owners of OID Debt Instruments
How To Get Tax Help
- The Taxpayer Advocate Service Is Here To Help You
- Low Income Taxpayer Clinics
Index

Contents

Future Developments ............ 1

Photographs of Missing Children ..... 1

Introduction .................. 1

Definitions ................... 2

Debt Instruments on the OID List ..... 3

Debt Instruments Not on the OID

List .................... 3

Information for Brokers and Other

Middlemen ................ 3

Short-Term Obligations

Redeemed at Maturity ........ 3

Long-Term Debt Instruments ...... 4

Certificates of Deposit .......... 4

Bearer Bonds and Coupons ....... 4

Backup Withholding ........... 4

Information for Owners of OID Debt

Instruments ............... 5

Form 1099-OID .............. 6

How To Report OID ........... 7

Figuring OID on Long-Term

Debt Instruments ........... 7

Figuring OID on Stripped Bonds

and Coupons ............ 12

Index ..................... 17

Future Developments

For the latest information about developments

related to Pub. 1212, such as legislation

enacted after it was published, go to IRS.gov/

pub1212.

Photographs of Missing

Children

The Internal Revenue Service is a proud partner

with the National Center for Missing and

Exploited Children. Photographs of missing

children selected by the Center may appear in

this publication on pages that would otherwise

be blank. You can help bring these children

home by looking at the photographs and calling

800-THE-LOST (800-843-5678) if you

recognize a child.

Introduction

This publication has two purposes. Its primary

purpose is to help brokers and other middlemen

identify publicly offered original issue discount

(OID) debt instruments they may hold as nomi-

nees for the true owners, so they can file Forms

1099-OID or Forms 1099-INT as required. The

other purpose of the publication is to help own-

ers of publicly offered OID debt instruments de-

termine how much OID to report on their in-

come tax returns.

Department

of the

Treasury

Internal

Revenue

Service

Publication 1212

(Rev. January 2018)

Cat. No. 61273T

Guide to

Original

Issue

Discount (OID)

Instruments

Get forms and other information faster and easier at:

•IRS.gov (English)

•IRS.gov/Spanish (Español)

•IRS.gov/Chinese (中文)

•IRS.gov/Korean (한국어)

•IRS.gov/Russian (Pусский)

•IRS.gov/Vietnamese (TiếngViệt)

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Nov 13, 2017

The list of publicly offered OID debt instru-

ments (OID list) is on the IRS website. The origi-

nal issue discount tables, Sections I-A through

III-F, are only available on the IRS website at

IRS.gov/pub1212 by clicking the link under Re-

cent Developments. The tables are posted to

the website in late November or early Decem-

ber of each year. The information on these lists

comes from the issuers of the debt instruments

and from financial publications and is updated

annually. (However, see Debt Instruments Not

on the OID List, later.)

Brokers and other middlemen can rely on

this list to determine, for information reporting

purposes, whether a debt instrument was is-

sued at a discount and the OID to be reported

on information returns. However, because the

information in the list has generally not been

verified by the IRS as correct, the following tax

matters are subject to change upon examina-

tion by the IRS.

The OID reported by owners of a debt in-

strument on their income tax returns.

The issuer's classification of an instrument

as debt for federal income tax purposes.

The adjusted basis of a debt instrument.

Instructions for issuers of OID debt instru-

ments. In general, issuers of publicly offered

OID debt instruments must, within 30 days after

the issue date, report information about the in-

struments to the IRS on Form 8281, Information

Return for Publicly Offered Original Issue Dis-

count Instruments. In addition, Form 8281 must

be filed for a debt instrument that is part of an

issue the offering of which is registered with the

Securities and Exchange Commission after the

issue date of the debt instrument and such reg-

istration occurs on or after January 1, 2014.

See the form instructions for more information.

Issuers should report errors in and

omissions from the list in writing at the

following address:

IRS OID Publication Project

SE:W:CAR:MP:TFP

1111 Constitution Ave. NW, IR-6526

Washington, DC 20224

REMIC and CDO information reporting re-

quirements. Brokers and other middlemen

must follow special information reporting re-

quirements for real estate mortgage investment

conduit (REMIC) regular interests, and collater-

alized debt obligations (CDO) interests. The

rules are explained in Publication 938, Real Es-

tate Mortgage Investment Conduits (REMICs)

Reporting Information (And Other Collateralized

Debt Obligations (CDOs)).

Holders of interests in REMICs and CDOs

should see chapter 1 of Publication 550 for in-

formation on REMICs and CDOs.

Comments and suggestions. We welcome

your comments about this publication and your

suggestions for future editions.

You can send us comments through

IRS.gov/FormComments. Or you can write to:

Internal Revenue Service

Tax Forms and Publications

1111 Constitution Ave. NW, IR-6526

Washington, DC 20224

Although we cannot respond individually to

each comment received, we do appreciate your

feedback and will consider your comments as

we revise our tax forms, instructions, and publi-

cations.

Ordering forms and publications. Visit

IRS.gov/FormsPubs to download forms and

publications. Otherwise, you can go to IRS.gov/

OrderForms to order current and prior-year

forms and instructions. Your order should arrive

within 10 business days.

Tax questions. If you have a tax question

not answered by this publication, check

IRS.gov and How To Get Tax Help at the end of

this publication.

Useful Items

You may want to see:

Publication

Withholding of Tax on Nonresident

Aliens and Foreign Entities

Investment Income and Expenses

Real Estate Mortgage Investment

Conduits (REMICs) Reporting

Information (And Other Collateralized

Debt Obligations (CDOs)).

Form (and Instructions)

Annual Summary and Transmittal of

U.S. Information Returns

Proceeds From Broker and Barter

Exchange Transactions

Interest Income

Original Issue Discount

Sales and Other Dispositions of

Capital Assets

Interest and Ordinary Dividends

Capital Gains

and Losses

Instructions for the Requester of

Forms W-8BEN, W-8ECI, W-8EXP,

and W-8IMY

See How To Get Tax Help near the end of this

publication for information about getting publi-

cations and forms.

Definitions

The following terms are used throughout this

publication. “Original issue discount” is defined

first. The other terms are listed alphabetically.

Original issue discount (OID). OID is a form

of interest. It is the excess of a debt instru-

ment's stated redemption price at maturity over

its issue price (acquisition price for a stripped

bond or coupon). Zero coupon bonds and debt

instruments that pay no stated interest until ma-

515

550

938

1096

1099-B

1099-INT

1099-OID

8949

Schedule B (Form 1040A or 1040)

Schedule D (Form 1040)

W-8

turity are examples of debt instruments that

have OID.

Accrual period. An accrual period is an inter-

val of time used to measure OID. The length of

an accrual period can be 6 months, a year, or

some other period no longer than one year, de-

pending on when the debt instrument was is-

sued.

Acquisition premium. Acquisition premium is

the excess of a debt instrument's adjusted ba-

sis immediately after purchase, including pur-

chase at original issue, over the debt instru-

ment's adjusted issue price at that time. A debt

instrument does not have acquisition premium,

however, if the debt instrument was purchased

at a premium. See Premium, later.

Adjusted issue price. The adjusted issue

price of a debt instrument at the beginning of an

accrual period is used to figure the OID alloca-

ble to that period. In general, the adjusted issue

price at the beginning of the debt instrument's

first accrual period is its issue price. The adjus-

ted issue price at the beginning of any subse-

quent accrual period is the sum of the issue

price and all the OID includible in income before

that accrual period minus any payment previ-

ously made on the debt instrument, other than a

payment of qualified stated interest.

Debt instrument. The term “debt instrument”

means any instrument or contractual arrange-

ment that constitutes indebtedness under gen-

eral principles of federal income tax law (includ-

ing, for example, a bond, debenture, note,

certificate, or other evidence of indebtedness).

It generally does not include an annuity con-

tract.

Issue price. For debt instruments listed in

Section I-A and Section I-B, the issue price gen-

erally is the initial offering price to the public (ex-

cluding bond houses and brokers) at which a

substantial amount of these instruments was

sold.

Market discount. A debt instrument generally

is acquired with market discount if its stated re-

demption price at maturity is greater than its ba-

sis immediately after its acquisition. Market dis-

count arises when a debt instrument purchased

in the secondary market has decreased in value

since its issue date, generally because of an in-

crease in interest rates. An OID debt instrument

has market discount if your adjusted basis in

the debt instrument immediately after you ac-

quired it (usually its purchase price) was less

than the debt instrument's issue price plus the

total OID that accrued before you acquired it.

The market discount is the difference between

the issue price plus accrued OID and your ad-

justed basis.

Premium. A debt instrument is purchased at a

premium if its adjusted basis immediately after

purchase is greater than the total of all amounts

payable on the debt instrument after the pur-

chase date, other than qualified stated interest.

The premium is the excess of the adjusted ba-

sis over the payable amounts. See Publication

550 for information on the tax treatment of bond

premium.

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Page 2 Publication 1212 (January 2018)

Qualified stated interest. In general, qualified

stated interest is stated interest that is uncondi-

tionally payable in cash or property (other than

debt instruments of the issuer) at least annually

over the term of the debt instrument at a single

fixed rate.

Stated redemption price at maturity. A debt

instrument's stated redemption price at maturity

is the sum of all amounts (principal and interest)

payable on the debt instrument other than quali-

fied stated interest.

Yield to maturity (YTM). In general, the YTM

is the discount rate that, when used in figuring

the present value of all principal and interest

payments, produces an amount equal to the is-

sue price of the debt instrument. The YTM is

generally shown on the face of the debt instru-

ment or in the literature you receive from your

broker. If you do not have this information, con-

sult your broker, tax advisor, or the issuer.

Debt Instruments

on the OID List

The OID list on the IRS website can be used by

brokers and other middlemen to prepare infor-

mation returns.

If you own a listed debt instrument, you

generally should not rely on the infor-

mation in the OID list to determine (or

compare) the OID to be reported on your tax re-

turn. The OID amounts listed are figured without

reference to the price or date at which you ac-

quired the debt instrument. For information

about determining the OID to be reported on

your tax return, see the instructions for figuring

OID under Information for Owners of OID Debt

Instruments, later.

The following discussions explain what in-

formation is contained in each section of the list.

Section I. This section contains publicly of-

fered, long-term debt instruments.

Section I-A: Corporate Debt Instruments

Issued Before 1985.

Section I-B: Corporate Debt Instruments

Issued After 1984.

Section I-C: Inflation-Indexed Debt Instru-

ments.

For each publicly offered debt instrument in

Section I, the list contains the following informa-

tion.

The name of the issuer.

The Committee on Uniform Security Identi-

fication Procedures (CUSIP) number.

The issue date.

The maturity date.

The issue price expressed as a percent of

principal or of stated redemption price at

maturity.

The annual stated or coupon interest rate.

(This rate is shown as 0.00 if no annual in-

terest payments are provided.)

The yield to maturity will be added to Sec-

tion I-B for bonds issued after December

31, 2006.

The total OID accrued up to January 1 of a

calendar year. (This information is not

available for every instrument.)

CAUTION

For long-term debt instruments issued af-

ter July 1, 1982, the daily OID for the ac-

crual periods falling in a calendar year and

a subsequent year.

The total OID per $1,000 of principal or

maturity value for a calendar year and a

subsequent year.

Section II. This section contains stripped cou-

pons and principal components of U.S. Treas-

ury and Government-Sponsored Enterprise

debt instruments. These stripped components

are available through the Department of the

Treasury's Separate Trading of Registered In-

terest and Principal of Securities (STRIPS) pro-

gram and government-sponsored enterprises

such as the Resolution Funding Corporation.

This section also includes debt instruments

backed by U.S. Treasury securities that repre-

sent ownership interests in those securities.

The obligations listed in Section II are ar-

ranged by maturity date. The amounts listed are

the total OID for a calendar year per $1,000 of

redemption price.

Section III. This section contains short-term

discount obligations.

Section III-A: Short-Term U.S. Treasury

Bills.

Section III-B: Federal Home Loan Banks.

Section III-C: Federal National Mortgage

Association.

Section III-D: Federal Farm Credit Banks.

Section III-E: Federal Home Loan Mort-

gage Corporation.

Section III-F: Federal Agricultural Mortgage

Corporation.

Information that supplements Sec-

tion III-A is available on the Internet at

http://www.treasurydirect.gov/

tdhome.htm.

The short-term obligations listed in this sec-

tion are arranged by maturity date. For each ob-

ligation, the list contains the CUSIP number,

maturity date, issue date, issue price (ex-

pressed as a percent of principal), and discount

to be reported as interest for a calendar year

per $1,000 of redemption price. Brokers and

other middlemen should rely on the issue price

information in Section III only if they are unable

to determine the price actually paid by the

owner.

Debt Instruments

Not on the OID List

The list of debt instruments discussed earlier

does not contain the following items.

U.S. savings bonds.

Certificates of deposit and other

face-amount certificates issued at a dis-

count, including syndicated certificates of

deposit.

Obligations issued by tax-exempt organi-

zations.

OID debt instruments that matured or were

entirely called by the issuer before the ta-

bles were posted on the IRS website.

Mortgage-backed securities and mortgage

participation certificates.

Long-term OID debt instruments issued

before May 28, 1969.

Short-term obligations, other than the obli-

gations listed in Section III.

Debt instruments issued at a discount by

states or their political subdivisions.

REMIC regular interests and CDOs.

Commercial paper and banker's acceptan-

ces issued at a discount.

Obligations issued at a discount by individ-

uals.

Foreign obligations not traded in the Uni-

ted States and obligations not issued in the

United States.

Information for

Brokers and

Other Middlemen

The following discussions contain specific in-

structions for brokers and middlemen who hold

or redeem a debt instrument for the owner.

In general, you must file a Form 1099 for the

debt instrument if the interest or OID to be inclu-

ded in the owner's income for a calendar year

totals $10 or more. You also must file a Form

1099 if you were required to deduct and with-

hold tax, even if the interest or OID is less than

$10. See Backup Withholding, later.

If you must file a Form 1099, furnish a copy

to the owner of the debt instrument by January

31 in the year it is due. File all your Forms 1099

with the IRS, accompanied by Form 1096, by

February 28 in the year it is due (March 31 if

you file electronically).

Electronic payee statements. You can issue

Form 1099-OID electronically with the consent

of the recipient.

More information. For more information, in-

cluding penalties for failure to file (or furnish) re-

quired information returns or statements, see

the current General Instructions for Certain In-

formation Returns.

Short-Term Obligations

Redeemed at Maturity

If you redeem a short-term discount obligation

for the owner at maturity, you must report the

discount as interest on Form 1099-INT.

To figure the discount, use the purchase

price shown on the owner's copy of the pur-

chase confirmation receipt or similar record, or

the price shown in your transaction records.

If the owner's purchase price cannot be de-

termined, figure the discount as if the owner

had purchased the obligation at its original is-

sue price. A special rule is used to determine

the original issue price for information reporting

on U.S. Treasury bills (T-bills) listed in Sec-

tion III-A. Under this rule, you treat as the origi-

nal issue price of the T-bill the noncompetitive

(weighted average of accepted auction bids)

discount price for the longest-maturity T-bill ma-

turing on the same date as the T-bill being re-

deemed. This noncompetitive discount price is

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Publication 1212 (January 2018) Page 3

the issue price (expressed as a percent of prin-

cipal) shown in Section III-A.

A similar rule is used to figure the discount

on short-term discount obligations issued by the

organizations listed in Section III-B through

Section III-F.

Example 1. There are 13-week and

26-week T-bills maturing on the same date as

the T-bill being redeemed. The price actually

paid by the owner cannot be established by

owner or middleman records. You treat as the

issue price of the T-bill the noncompetitive dis-

count price (expressed as a percent of princi-

pal) shown in Section III-A for a 26-week bill

maturing on the same date as the T-bill re-

deemed. The interest you report on Form

1099-INT is the OID (per $1,000 of principal)

shown in Section III-A for that obligation.

Long-Term

Debt Instruments

If you hold a long-term OID debt instrument as a

nominee for the true owner, you generally must

file Form 1099-OID. For this purpose, you can

rely on Section I of the OID list to determine the

following information.

Whether a debt instrument has OID.

The OID to be reported on the Form

1099-OID.

In general, you must report OID on publicly

offered, long-term debt instruments listed in

Section I. You also can report OID on other

long-term debt instruments.

Form 1099-OID. On Form 1099-OID for a cal-

endar year show the following information.

Box 1. The OID for the actual dates the

owner held the debt instruments during a

calendar year. To determine this amount,

see Figuring OID, next. You may report a

net amount of OID that reflects the offset of

OID by the amount of acquisition premium

amortization for the year. If you do so,

leave box 6 blank.

Box 2. The qualified stated interest paid or

credited during the calendar year. Interest

reported here is not reported on Form

1099-INT. The qualified stated interest on

Treasury inflation-protected securities may

be reported on Form 1099-INT in box 3 in-

stead.

Box 3. Any interest or principal forfeited

because of an early withdrawal that the

owner can deduct from gross income. Do

not reduce the amounts in boxes 1 and 2

by the forfeiture.

Box 4. Any backup withholding for this

debt instrument.

Box 5. For a covered security acquired

with market discount, enter the amount of

market discount that accrued during the

period the holder owned the debt instru-

ment provided the holder notified you of an

election made under section 1278(b) to in-

clude market discount in income as it ac-

crued. Follow the instructions in Regula-

tions section 1.6045-1(n) to determine the

accruals of market discount.

Box 6. For a covered security acquired

with acquisition premium, enter the amount

of acquisition premium amortization for the

period the holder owned the debt instru-

ment. If a net amount of OID is reported in

box 1, box 8, or box 11 as applicable,

leave this box blank. Follow the instruc-

tions in Regulations section 1.6045-1(n) to

determine the amortization of acquisition

premium.

Box 7. The CUSIP number, if any. If there

is no CUSIP number, give a description of

the debt instrument, including the abbrevi-

ation for the stock exchange, the abbrevia-

tion used by the stock exchange for the is-

suer, the coupon rate, and the year of

maturity (for example, NYSE XYZ 12.50

2006). If the issuer of the debt instrument

is other than the payer, show the name of

the issuer in this box.

Box 8. The OID on a U.S. Treasury obliga-

tion for the part of the year the owner held

the debt instrument. You may report a net

amount of OID that reflects the offset of

OID by the amount of acquisition premium

amortization for the year. If you do so,

leave box 6 blank.

Box 9. Investment expenses passed on to

holders of a single-class REMIC.

Box 10. For a taxable covered security ac-

quired at a premium, enter the amount of

bond premium amortization allocable to

the interest paid during the tax year, unless

you were notified in writing that the holder

did not want to amortize bond premium un-

der section 171. See Regulations sections

1.6045-1(n)(5) and 1.6049-9(b). If you are

required to report bond premium amortiza-

tion and you reported a net amount of in-

terest in box 2, leave this box blank.

Box 11. Use to report any Tax-exempt

OID.

Boxes 12-14. Use to report any state in-

come tax withheld for this debt instrument.

Figuring OID. You can determine the OID on a

long-term debt instrument by using either of the

following.

Section I of the OID list.

The income tax regulations.

Using Section I. If the owner held the debt

instrument for the entire calendar year, report

the OID shown in Section I for the calendar

year. Because OID is listed for each $1,000 of

stated redemption price at maturity, you must

adjust the listed amount to reflect the debt in-

strument's actual stated redemption price at

maturity. For example, if the debt instrument's

stated redemption price at maturity is $500, re-

port one-half the listed OID.

If the owner held the debt instrument for less

than the entire calendar year, figure the OID to

report as follows.

1. Look up the daily OID for the first accrual

period in the calendar year during which

the owner held the debt instrument.

2. Multiply the daily OID by the number of

days the owner held the debt instrument

during that accrual period.

3. Repeat steps (1) and (2) for any remaining

accrual periods for the year during which

the owner held the debt instrument.

4. Add the results in steps (2) and (3) to de-

termine the owner's OID per $1,000 of sta-

ted redemption price at maturity.

5. If necessary, adjust the OID in (4) to reflect

the debt instrument's stated redemption

price at maturity.

Report the result on Form 1099-OID in box 1.

Using the income tax regulations. In-

stead of using Section I to figure OID, you can

use the regulations under sections 1272

through 1275 of the Internal Revenue Code. For

example, under the regulations, you can use

monthly accrual periods in figuring OID for a

debt instrument issued after April 3, 1994, that

provides for monthly payments. (If you use Sec-

tion I-B, the OID is figured using 6-month ac-

crual periods.)

For a general explanation of the rules for fig-

uring OID under the regulations, see Figuring

OID on Long-Term Debt Instruments under In-

formation for Owners of OID Debt Instruments,

later.

Certificates of Deposit

If you hold a bank certificate of deposit (CD) as

a nominee, you must determine whether the CD

has OID and any OID includible in the income of

the owner. You must file an information return

showing the reportable interest and OID, if any,

on the CD. These rules apply whether or not

you sold the CD to the owner. Report OID on a

CD in the same way as OID on other debt in-

struments. See Short-Term Obligations Re-

deemed at Maturity and Long-Term Debt Instru-

ments earlier.

Bearer Bonds and Coupons

If a coupon from a bearer bond is presented to

you for collection before the bond matures, you

generally must report the interest on Form

1099-INT. However, do not report the interest if

either of the following apply.

You hold the bond as a nominee for the

true owner.

The payee is a foreign person. See Pay-

ments to foreign person under Backup

Withholding, later.

Because you cannot assume the presenter of

the coupon also owns the bond, you should not

report OID on the bond on Form 1099-OID. The

coupon may have been “stripped” (separated)

from the bond and separately purchased.

However, if a long-term bearer bond on the

OID list is presented to you for redemption upon

call or maturity, you should prepare a Form

1099-OID showing the OID for that calendar

year, as well as any coupon interest payments

collected at the time of redemption.

Backup Withholding

If you report OID on Form 1099-OID or interest

on Form 1099-INT for a calendar year, you may

be required to apply backup withholding to the

reportable payment at a rate of 28%. The

backup withholding is deducted at the time a

cash payment is made. See Pub. 1281, Backup

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Page 4 Publication 1212 (January 2018)

Withholding for Missing and Incorrect Name/

TIN(s), for more information.

Backup withholding generally applies to re-

portable interest and OID in the following situa-

tions.

1. The payee does not give you a taxpayer

identification number (TIN).

2. The IRS notifies you that the payee gave

an incorrect TIN.

3. The IRS notifies you that the payee is sub-

ject to backup withholding due to payee

underreporting.

4. For debt instruments acquired after 1983:

a. The payee does not certify, under

penalties of perjury, that he or she is

not subject to backup withholding un-

der (3), or

b. The payee does not certify, under

penalties of perjury, that the TIN given

is correct.

However, for short-term discount obligations

(other than government obligations), bearer

bonds and coupons, and U.S. savings bonds,

backup withholding applies to reportable inter-

est and OID only if the payee does not give you

a TIN or gives you an obviously incorrect num-

ber for a TIN.

Short-term obligations. Backup withholding

applies to the payment of OID that is includible

in the holder’s gross income, to the extent it is in

cash. However, backup withholding applies to

any interest payable before maturity when the

interest is paid or credited.

If the owner of a short-term obligation at ma-

turity is not the original owner and can establish

the purchase price of the obligation, the amount

subject to backup withholding must be deter-

mined by treating the purchase price as the is-

sue price. However, you can choose to disre-

gard that price if it would require significant

manual intervention in the computer or record-

keeping system used for the obligation. If the

purchase price of a listed obligation is not es-

tablished or is disregarded, you must use the is-

sue price shown in Section III.

Long-term obligations. If no cash payments

are made on a long-term obligation before ma-

turity, backup withholding applies only at matur-

ity. The amount subject to backup withholding is

the OID includible in the owner's gross income

for the calendar year when the obligation ma-

tures. The amount to be withheld is limited to

the cash paid.

Registered long-term obligations with

cash payments. If a registered long-term obli-

gation has cash payments before maturity,

backup withholding applies when a cash pay-

ment is made. The amount subject to backup

withholding is the total of the qualified stated in-

terest (defined earlier under Definitions) and

OID includible in the owner's gross income for

the calendar year when the payment is made. If

more than one cash payment is made during

the year, the OID subject to withholding for the

year must be allocated among the expected

cash payments in the ratio that each bears to

the total of the expected cash payments. For

any payment, the required withholding is limited

to the cash paid.

Payee not the original owner. If the

payee is not the original owner of the obligation,

the OID subject to backup withholding is the

OID includible in the gross income of all owners

during the calendar year (without regard to any

amount paid by the new owner at the time of

transfer). The amount subject to backup with-

holding at maturity of a listed obligation must be

determined using the issue price shown in Sec-

tion I.

Bearer long-term obligations with cash

payments. If a bearer long-term obligation has

cash payments before maturity, backup with-

holding applies when the cash payments are

made. For payments before maturity, the

amount subject to withholding is the qualified

stated interest (defined earlier under Defini-

tions) includible in the owner's gross income for

the calendar year. For a payment at maturity,

the amount subject to withholding is only the to-

tal of any qualified stated interest paid at matur-

ity and the OID includible in the owner's gross

income for the calendar year when the obliga-

tion matures. The required withholding at ma-

turity is limited to the cash paid.

Sales and redemptions. If you report the

gross proceeds from a sale, exchange, or re-

demption of a debt instrument on Form 1099-B

for a calendar year, you may be required to

withhold 28% of the amount reported. Backup

withholding applies in the following situations.

The payee does not give you a TIN.

The IRS notifies you that the payee gave

an incorrect TIN.

For debt instruments held in an account

opened after 1983, the payee does not

certify, under penalties of perjury, that the

TIN given is correct.

Payments outside the United States to U.S.

person. The requirements for backup with-

holding and information reporting apply to pay-

ments of OID and interest made outside the

United States to a U.S. person, or a foreign per-

son at least 50% of whose income for the pre-

ceding 3-year period is effectively connected

with the conduct of a U.S. trade or business.

Payments to foreign person. The following

discussions explain the rules for backup with-

holding and information reporting on payments

to foreign persons.

U.S.-source amount. Backup withholding

and information reporting are not required for

payments of U.S.-source OID, interest, or pro-

ceeds from a sale or redemption of an OID in-

strument if the payee has given you proof (gen-

erally the appropriate Form W-8 or an

acceptable substitute) that the payee is a for-

eign person. A U.S. resident is not a foreign

person. For proof of the payee's foreign status,

you can rely on the appropriate Form W-8 or on

documentary evidence for payments made out-

side the United States to an offshore account

or, in case of broker proceeds, a sale effected

outside the United States. Receipt of the appro-

priate Form W-8 does not relieve you from infor-

mation reporting and backup withholding if you

actually know the payee is a U.S. person.

For information about the 28% withholding

tax that may apply to payments of U.S.-source

OID or interest to foreign persons, see Publica-

tion 515.

Foreign-source amount. Backup with-

holding and information reporting are not re-

quired for payments of foreign-source OID and

interest paid and received outside the U.S.

However, if the payments are made inside the

United States, the requirements for backup

withholding and information reporting will apply

unless the payee has given you the appropriate

Form W-8 or acceptable substitute as proof that

the payee is a foreign person.

More information. For more information

about backup withholding and information re-

porting on foreign-source amounts or payments

to foreign persons, see Regulations section

1.6049-5.

Information for

Owners of OID

Debt Instruments

This section is for persons who prepare their

own tax returns. It discusses the income tax

rules for figuring and reporting OID on long-term

debt instruments. It also includes a similar dis-

cussion for stripped bonds and coupons, such

as zero coupon bonds available through the

Department of the Treasury's STRIPS program

and government-sponsored enterprises such

as the Resolution Funding Corporation. How-

ever, the information provided does not cover

every situation. More information can be found

in the regulations under sections 1271 through

1275 of the Internal Revenue Code.

Including OID in income. Generally, you in-

clude OID in income as it accrues each year,

whether or not you receive any payments from

the debt instrument issuer.

Exceptions. The rules for including OID in

income as it accrues generally do not apply to

the following debt instruments.

U.S. savings bonds.

Tax-exempt obligations. (However, see

Tax-Exempt Bonds and Coupons, later.)

Obligations issued by individuals before

March 2, 1984.

Loans of $10,000 or less between individu-

als who are not in the business of lending

money. (The dollar limit includes outstand-

ing prior loans by the lender to the bor-

rower.) This exception does not apply if a

principal purpose of the loan is to avoid

any federal tax.

See chapter 1 of Publication 550 for infor-

mation about the rules for these and other types

of discounted debt instruments, such as

short-term and market discount obligations.

Publication 550 also discusses rules for holders

of REMIC interests and CDOs.

De minimis rule. You can treat OID as zero if

the total OID on a debt instrument is less than

one-fourth of 1% (.0025) of the stated redemp-

tion price at maturity multiplied by the number of

full years from the date of original issue to

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Publication 1212 (January 2018) Page 5

maturity. Debt instruments with de minimis OID

are not listed in this publication. There are spe-

cial rules to determine the de minimis amount in

the case of debt instruments that provide for

more than one payment of principal. Also, the

de minimis rules generally do not apply to

tax-exempt obligations.

Example 2. You bought at issuance a

10-year debt instrument with a stated redemp-

tion price at maturity of $1,000, issued at $980

with OID of $20. One-fourth of 1% of $1,000

(the stated redemption price) times 10 (the

number of full years from the date of original is-

sue to maturity) equals $25. Under the de mini-

mis rule, you can treat the OID as zero because

the $20 discount is less than $25.

Example 3. Assume the same facts as Ex-

ample 2, except the debt instrument was issued

at $950. You must report part of the $50 OID

each year because it is more than $25.

Choice to report all interest as OID. Gener-

ally, you can choose to treat all interest on a

debt instrument acquired after April 3, 1994, as

OID and include it in gross income by using the

constant yield method. See Constant yield

method under Debt Instruments Issued After

1984, later, for more information.

For this choice, interest includes stated in-

terest, acquisition discount, OID, de minimis

OID, market discount, de minimis market dis-

count, and unstated interest, as adjusted by any

amortizable bond premium or acquisition pre-

mium. For more information, see Regulations

section 1.1272-3.

Purchase after date of original issue. A debt

instrument you purchased after the date of origi-

nal issue may have premium, acquisition pre-

mium, or market discount. If your debt instru-

ment has premium or acquisition premium, the

OID reported to you on Form 1099-OID may

have to be adjusted. For more information, see

Showing an OID adjustment under How To Re-

port OID, later. If your debt instrument is a cov-

ered security under Regulations section

1.6045-1(a)(15), market discount, acquisition

premium, or premium is reported in box 5, 6 or

10 of Form 1099-OID, respectively. The follow-

ing rules generally do not apply to contingent

payment debt instruments.

Adjustment for premium. If your debt in-

strument (other than an inflation-indexed debt

instrument) has premium, do not report any OID

as ordinary income. Your adjustment is the total

OID shown on your Form 1099-OID.

Adjustment for acquisition premium. If

your debt instrument has acquisition premium,

reduce the OID you report. Your adjustment is

the difference between the OID shown on your

Form 1099-OID and the reduced OID amount

figured using the rules explained later under

Figuring OID on Long-Term Debt Instruments. If

your debt instrument is a covered security un-

der Regulations section 1.6045-1(a)(15), your

broker may either report the acquisition pre-

mium amortization adjustment amount in box 6

or may report a net amount of OID in box 1 or

box 8, as applicable, that reflects the adjust-

ment of OID by the amortized acquisition pre-

mium. In general, your broker will use the rules

in Regulations section 1.1272-2(b)(4) to deter-

mine the amortization of acquisition premium.

Market discount. If your debt instrument

has market discount that you choose to include

in income currently and if the debt instrument is

a covered security under Regulations section

1.6045-1(a)(15), the market discount includible

in income is reported in box 5 of Form 1099-

OID. Unless you notify your broker in writing

that you have not elected to use a constant

yield method under section 1276(b) to deter-

mine accruals of market discount, your broker

will use a constant yield method to determine

accruals of market discount rather than a rata-

ble method.

See Market Discount Bonds in chapter 1 of

Publication 550 for information on how to figure

accrued market discount and include it in your

income currently and for other information

about market discount bonds. If you choose to

use the constant yield method to figure accrued

market discount, also see Figuring OID on

Long-Term Debt Instruments, later. The con-

stant yield method of figuring accrued OID, ex-

plained in those discussions under Constant

yield method, is also used to figure accrued

market discount.

For more information concerning premium

or market discount on an inflation-indexed debt

instrument, see Regulations section 1.1275-7.

Sale, exchange, or redemption. Generally,

you treat your gain or loss from the sale, ex-

change, or redemption of an OID debt instru-

ment as a capital gain or loss if you held the

debt instrument as a capital asset. If you sold

the debt instrument through a broker, you

should receive Form 1099-B or an equivalent

statement from the broker. Use the Form

1099-B or other statement and your brokerage

statements to complete Form 8949, and Sched-

ule D (Form 1040).

Your gain or loss is the difference between

the amount you realized on the sale, exchange,

or redemption and your basis in the debt instru-

ment. Your basis, generally, is your cost in-

creased by the OID you have included in in-

come each year you held it. In general, to

determine your gain or loss on a tax-exempt

bond, figure your basis in the bond by adding to

your cost the OID you would have included in

income if the bond had been taxable. For a cov-

ered security, your broker will report the adjus-

ted basis of the debt instrument to you on Form

1099-B.

See chapter 4 of Publication 550 for more

information about the tax treatment of the sale

or redemption of discounted debt instruments.

Example 4. Larry, a calendar year tax-

payer, bought a corporate debt instrument at

original issue for $86,235.00 on November 1 of

Year 1. The 15-year debt instrument matures on

October 31 of Year 16 at a stated redemption

price of $100,000. The debt instrument pro-

vides for semiannual payments of interest at

10%. Assume the debt instrument is a capital

asset in Larry's hands. The debt instrument has

$13,765.00 of OID ($100,000 stated redemp-

tion price at maturity minus $86,235.00 issue

price).

Larry sold the debt instrument for $90,000

on November 1 of Year 4. Including the OID he

will report for the period he held the debt instru-

ment in Year 4, Larry has included $4,556.00 of

OID in income and has increased his basis by

that amount to $90,791.00. Larry has realized a

loss of $791.00. All of Larry's loss is capital

loss.

Form 1099-OID

The issuer of the debt instrument (or your

broker, if you purchased or held the debt instru-

ment through a broker) should give you a copy

of Form 1099-OID or a similar statement if the

accrued OID for the calendar year is $10 or

more and the term of the debt instrument is

more than 1 year. Form 1099-OID shows all

OID income in box 1 except OID on a U.S.

Treasury obligation, which is shown in box 8. It

also shows, in box 2, any qualified stated inter-

est you must include in income. (However, any

qualified stated interest on Treasury infla-

tion-protected securities can be reported on

Form 1099-INT in box 3.) For a taxable covered

security, Form 1099-OID may show accrued

market discount in box 5, acquisition premium

in box 6, or premium in box 10. For a taxable

covered security with acquisition premium,

box 1 or box 8, as applicable, may show a net

amount of OID that reflects the offset of OID by

the amount of acquisition premium amortization

for the year. If so, box 6 will be blank. For a cov-

ered security with bond premium, box 2 may

show a net amount of qualified stated interest

that reflects the offset of interest income by the

amount of premium amortization for the year. If

so, box 10 will be blank. A copy of Form

1099-OID will be sent to the IRS. Do not attach

your copy to your tax return. Keep it for your re-

cords.

If you are required to file a tax return

and you receive Form 1099-OID show-

ing taxable amounts, you must report

these amounts on your return. A 20% accu-

racy-related penalty may be charged for under-

payment of tax due to either negligence or dis-

regard of rules and regulations or substantial

understatement of tax.

Form 1099-OID not received. If you held an

OID debt instrument for a calendar year but did

not receive a Form 1099-OID, refer to the dis-

cussions under Figuring OID on Long-Term

Debt Instruments, later, for information on the

OID you must report.

Refiguring OID. You may need to refigure the

OID shown on Form 1099-OID, in box 1 or

box 8, to determine the proper amount to in-

clude in income if one of the following applies.

You bought the debt instrument at a pre-

mium or at an acquisition premium. How-

ever, if you bought a covered security at an

acquisition premium, you may not have to

refigure the OID if your broker reported a

net adjusted amount of OID in box 1 or

box 8, as applicable, that reflects the ad-

justment of the OID by the amortized ac-

quisition premium.

The debt instrument is a stripped bond or

coupon (including zero coupon bonds

backed by U.S. Treasury securities).

The debt instrument is a contingent pay-

ment or inflation-indexed debt instrument.

CAUTION

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Page 6 Publication 1212 (January 2018)

See the discussions under Figuring OID on

Long-Term Debt Instruments or Figuring OID on

Stripped Bonds and Coupons, later, for the spe-

cific computations.

Refiguring interest. If you disposed of a debt

instrument or acquired it from another holder

between interest dates, see the discussion un-

der Bonds Sold Between Interest Dates in

chapter 1 of Publication 550 for information

about refiguring the interest shown on Form

1099-OID in box 2.

Nominee. If you are the holder of an OID debt

instrument and you receive a Form 1099-OID

that shows your taxpayer identification number

and includes amounts belonging to another per-

son, you are considered a “nominee.” You must

file another Form 1099-OID for each actual

owner, showing the OID for the owner. Show

the owner of the debt instrument as the “recipi-

ent” and you as the “payer.”

Complete Form 1099-OID and Form 1096

and file the forms with the Internal Revenue

Service Center for your area. You must also

give a copy of the Form 1099-OID to the actual

owner. However, you are not required to file a

nominee return to show amounts belonging to

your spouse. See the Form 1099 instructions

for more information.

When preparing your tax return, follow the

instructions under Showing an OID adjustment

in the next discussion.

How To Report OID

Generally, you report your taxable interest and

OID income on the interest line of Form

1040EZ, Form 1040A, or Form 1040.

Form 1040 or Form 1040A required. You

must use Form 1040 or Form 1040A (you can-

not use Form 1040EZ) under either of the fol-

lowing conditions.

You received a Form 1099-OID as a nomi-

nee for the actual owner.

Your total interest and OID income for the

year was more than $1,500.

You are reporting more or less OID than

the amount shown on Form 1099-OID,

other than because you are a nominee. For

example, you paid a premium or an ac-

quisition premium when you purchased the

debt instrument and you will report less

OID than shown on Form 1099-OID in

box 1 or box 8.

Form 1040 required. You must use Form

1040 if you were charged an early withdrawal

penalty.

Where to report. List each payer's name (if a

brokerage firm gave you a Form 1099, list the

brokerage firm as the payer) and the amount re-

ceived from each payer on Form 1040A,

Schedule B, Part I, line 1, or Form 1040, Sched-

ule B, line 1. Include all OID and periodic inter-

est shown on any Form 1099-OID, boxes 1, 2,

and 8, you received for the tax year. Also in-

clude any other OID and interest income for

which you did not receive a Form 1099.

Showing an OID adjustment. If you use Form

1040 to report more or less OID than shown in

box 1 or box 8 on Form 1099-OID, list the full

OID on Schedule B, Part I, line 1, and follow the

instructions under 1 or 2, next.

If you use Form 1040A to report the OID

shown on a Form 1099-OID you received as a

nominee for the actual owner, list the full OID on

Schedule B, Part I, line 1 and follow the instruc-

tions under 1, or 2 next.

1. If the OID, as adjusted, is less than the

amount shown on Form 1099-OID, show

the adjustment as follows.

a. Under your last entry on line 1, subto-

tal all interest and OID income listed

on line 1.

b. Below the subtotal, write “Nominee

Distribution” or “OID Adjustment” and

show the OID you are not required to

report.

c. Subtract that OID from the subtotal

and enter the result on line 2.

2. If the OID, as adjusted, is more than the

amount shown on Form 1099-OID, show

the adjustment as follows.

a. Under your last entry on line 1, subto-

tal all interest and OID income listed

on line 1.

b. Below the subtotal, write “OID Adjust-

ment” and show the additional OID.

c. Add that OID to the subtotal and enter

the result on line 2.

Figuring OID on

Long-Term Debt Instruments

How you figure the OID on a long-term debt in-

strument depends on the date it was issued. It

also may depend on the type of the debt instru-

ment. There are different rules for each of the

following debt instruments.

1. Debt instruments issued after July 1,

1982, and before 1985.

2. Debt instruments issued after 1984 (other

than debt instruments described in (5) and

(6)).

3. Contingent payment debt instruments is-

sued after August 12, 1996.

4. Inflation-indexed debt instruments (includ-

ing Treasury inflation-protected securities)

issued after January 5, 1997.

Zero coupon bonds. The rules for figuring

OID on zero coupon bonds backed by U.S.

Treasury securities are discussed under Figur-

ing OID on Stripped Bonds and Coupons, later.

Form 1099-OID. You should receive a Form

1099-OID showing OID for the part of the year

you held the debt instrument. However, if you

paid an acquisition premium, you may need to

refigure the OID to report on your tax return.

See Reduction for acquisition premium, later. If

your debt instrument is a covered security un-

der Regulations section 1.6045-1(a)(15), you

may not have to refigure the OID if your broker

reported a net adjusted amount of OID in box 1

or box 8, as applicable, that reflects the adjust-

ment of OID by the amortized acquisition pre-

mium.

If you held an OID debt instrument in a

calendar year but did not receive a

Form 1099-OID, see Form 1099-OID

not received, immediately below, and refer to

Section I-A available at IRS.gov/pub1212 by

clicking the link under Recent Developments.

Form 1099-OID not received. The OID listed

is for each $1,000 of redemption price. You

must adjust the listed amount if your debt instru-

ment has a different principal amount. For ex-

ample, if you have a debt instrument with a

$500 principal amount, use one-half the listed

amount to figure your OID.

If you held the debt instrument the entire

year, use the OID shown in Section I-A for a cal-

endar year. (If your debt instrument is not listed

in Section I-A, consult the issuer for information

about the issue price and the OID that accrued

for that year.) If you did not hold the debt instru-

ment the entire year, figure your OID using the

following method.

1. Divide the OID shown by 12.

2. Multiply the result in (1) by the number of

complete and partial months (for example,

612 months) you held the debt instrument

during a calendar year. This is the OID to

include in income unless you paid an ac-

quisition premium. The reduction for ac-

quisition premium is discussed next.

Reduction for acquisition premium. If you

bought the debt instrument at an acquisition

premium, figure the OID to include in income as

follows.

1. Divide the total OID on the debt instrument

by the number of complete months, and

any part of a month, from the date of origi-

nal issue to the maturity date. This is the

monthly OID.

2. Subtract from your cost the issue price

and the accumulated OID from the date of

issue to the date of purchase. (If the result

is zero or less, stop here. You did not pay

an acquisition premium.)

3. Divide the amount figured in (2) by the

number of complete months, and any part

of a month, from the date of your purchase

to the maturity date.

4. Subtract the amount figured in (3) from the

amount figured in (1). This is the OID to in-

clude in income for each month you hold

the debt instrument during the year.

Transfers during the month. If you buy or sell

a debt instrument on any day other than the

same day of the month as the date of original is-

sue, the ratable monthly portion of OID for the

month of sale is divided between the seller and

the buyer according to the number of days each

held the debt instrument. Your holding period

for this purpose begins the day you acquire the

debt instrument and ends the day before you

dispose of it.

Debt Instruments Issued After

July 1, 1982, and Before 1985

If you hold these debt instruments as capital as-

sets, you must include part of the OID in income

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Publication 1212 (January 2018) Page 7

each year you own the debt instruments and in-

crease your basis by the amount included. For

information about showing the correct OID on

your tax return, see How To Report OID, earlier.

Form 1099-OID. You should receive a Form

1099-OID showing OID for the part of the year

you held the debt instrument. However, if you

paid an acquisition premium, you may need to

refigure the OID to report on your tax return.

See Constant yield method and the discussions

on acquisition premium that follow, later.

If you held an OID debt instrument in a

calendar year but did not receive a

Form 1099-OID, see Form 1099-OID

not received, immediately below, and refer to

Section I-A available at IRS.gov/pub1212 by

clicking the link under Recent Developments.

Form 1099-OID not received. The OID listed

is for each $1,000 of redemption price. You

must adjust the listed amount if your debt instru-

ment has a different principal amount. For ex-

ample, if you have a debt instrument with a

$500 principal amount, use one-half the listed

amount to figure your OID.

If you held the debt instrument the entire

year, use the OID shown in Section I-A. (If your

instrument is not listed in Section I-A, consult

the issuer for information about the issue price,

the yield to maturity, and the OID that accrued

for that year.) If you did not hold the debt instru-

ment the entire year, figure your OID using ei-

ther of the following methods.

Method 1.

1. Divide the total OID for a calendar year by

365 (366 for leap years).

2. Multiply the result in (1) by the number of

days you held the debt instrument during

that particular year.

This computation is an approximation and may

result in a slightly higher OID than Method 2.

Method 2.

1. Look up the daily OID for the first accrual

period you held the debt instrument during

a calendar year. (See Accrual period un-

der Constant yield method, next.)

2. Multiply the daily OID by the number of

days you held the debt instrument during

that accrual period.

3. If you held the debt instrument for part of

both accrual periods, repeat (1) and (2) for

the second accrual period.

4. Add the results of (2) and (3). This is the

OID to include in income, unless you paid

an acquisition premium. (The reduction for

acquisition premium is discussed later.)

Constant yield method. This discussion

shows how to figure OID on debt instruments is-

sued after July 1, 1982, and before 1985, using

a constant yield method. OID is allocated over

the life of the debt instrument through adjust-

ments to the issue price for each accrual pe-

riod.

Figure the OID allocable to any accrual pe-

riod as follows.

1. Multiply the adjusted issue price at the be-

ginning of the accrual period by the debt

instrument's yield to maturity.

2. Subtract from the result in (1) any qualified

stated interest allocable to the accrual pe-

riod.

Accrual period. An accrual period for any

OID debt instrument issued after July 1, 1982,

and before 1985 is each year period beginning

on the date of the issue of the obligation and

each anniversary thereafter, or the shorter pe-

riod to maturity for the last accrual period. Your

tax year will usually include parts of two accrual

periods.

Daily OID. The OID for any accrual period

is allocated equally to each day in the accrual

period. You must include in income the sum of

the OID amounts for each day you hold the debt

instrument during the year. If your tax year in-

cludes parts of two or more accrual periods,

you must include the proper daily OID amounts

for each accrual period.

Figuring daily OID. The daily OID for the

initial accrual period is figured using the follow-

ing formula.

(ip × ytm) − qsi

ip = issue price

ytm = yield to maturity

qsi = qualified stated interest

p= number of days in accrual period

The daily OID for subsequent accrual peri-

ods is figured the same way except the adjus-

ted issue price at the beginning of each period

is used in the formula instead of the issue price.

Reduction for acquisition premium on debt

instruments purchased before July 19,

1984. If you bought the debt instrument at an

acquisition premium before July 19, 1984, fig-

ure the OID includible in income by reducing the

daily OID by the daily acquisition premium. Fig-

ure the daily acquisition premium by dividing

the total acquisition premium by the number of

days in the period beginning on your purchase

date and ending on the day before the date of

maturity.

Reduction for acquisition premium on debt

instruments purchased after July 18, 1984.

If you bought the debt instrument at an acquisi-

tion premium after July 18, 1984, figure the OID

includible in income by reducing the daily OID

by the daily acquisition premium. However, the

method of figuring the daily acquisition premium

is different from the method described in the

preceding discussion. To figure the daily ac-

quisition premium under this method, multiply

the daily OID by the following fraction.

The numerator is the acquisition premium.

The denominator is the total OID remaining

for the debt instrument after your purchase

date.

Section I-A is available at IRS.gov/

pub1212 and clicking the link under

Recent Developments.

Using Section I-A to figure accumulated

OID. If you bought your corporate debt instru-

ment in a calendar year or the subsequent year,

you can figure the accumulated OID to the date

of purchase by adding the following amounts.

1. The amount from the “Total OID to Janu-

ary 1, YYYY” column for your debt instru-

ment.

2. The OID from January 1 of a calendar year

to the date of purchase, figured as follows.

a. Multiply the daily OID for the first ac-

crual period in the calendar year by

the number of days from January 1 to

the date of purchase, or the end of the

accrual period if the debt instrument

was purchased in the second or third

accrual period.

b. Multiply the daily OID for each subse-

quent accrual period by the number of

days in the period to the date of pur-

chase or the end of the accrual pe-

riod, whichever applies.

c. Add the amounts figured in (2a) and

(2b).

Debt Instruments

Issued After 1984

If you hold debt instruments issued after 1984,

you must report part of the OID in gross income

each year that you own the debt instruments.

You must include the OID in gross income

whether or not you hold the debt instrument as

a capital asset. Your basis in the debt instru-

ment is increased by the OID you include in in-

come. For information about showing the cor-

rect OID on your tax return, see How To Report

OID, earlier.

Form 1099-OID. You should receive a Form

1099-OID showing OID for the part of a calen-

dar year you held the debt instrument. How-

ever, if you paid an acquisition premium, you

may need to refigure the OID to report on your

tax return. See Constant yield method and Re-

duction for acquisition premium, later.

If your taxable debt instrument is a covered

security, your broker will calculate the amortiza-

tion of acquisition premium for you. Your broker

may report either a gross amount of OID in

box 1 or box 8, as applicable, and the acquisi-

tion premium amortization in box 6, or may re-

port a net amount of OID that reflects the offset

of OID by the amount of acquisition premium

amortization for the year in box 1 or box 8, as

applicable. In general, your broker will use the

rules in Regulations section 1.1272-2(b)(4) to

determine the amortization of acquisition pre-

mium. However, you may use a constant yield

method to amortize acquisition premium if you

make an election under Regulations section

1.1272-3.

You may also need to refigure the OID for a

contingent payment or inflation-indexed debt in-

strument on which the amount reported on

Form 1099-OID is inaccurate. See Contingent

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Page 8 Publication 1212 (January 2018)

Payment Debt Instruments or Inflation-Indexed

Debt Instruments, later.

If you held an OID debt instrument in a

calendar year but did not receive a

Form 1099-OID, see Form 1099-OID

not received, immediately below, and refer to

Section I-B available at IRS.gov/pub1212 by

clicking the link under Recent Developments.

Form 1099-OID not received. The OID listed

is for each $1,000 of redemption price. You

must adjust the listed amount if your debt instru-

ment has a different principal amount. For ex-

ample, if you have a debt instrument with a

$500 principal amount, use one-half the listed

amount to figure your OID.

Use the OID shown in Section I-B for a cal-

endar year if you held the debt instrument the

entire year. (If your debt instrument is not listed

in Section I-B, consult the issuer for information

about the issue price, the yield to maturity, and

the OID that accrued for that year.) If you did

not hold the debt instrument the entire year, fig-

ure your OID as follows.

1. Look up the daily OID for the first accrual

period in which you held the debt instru-

ment during a calendar year. (See Accrual

period under Constant yield method,

later.)

2. Multiply the daily OID by the number of

days you held the debt instrument during

that accrual period.

3. Repeat (1) and (2) for any remaining ac-

crual periods in which you held the debt

instrument.

4. Add the results of (2) and (3). This is the

OID to include in income for that year, un-

less you paid an acquisition premium.

(The reduction for acquisition premium is

discussed later.)

Tax-exempt bond. If you own a tax-exempt

bond, figure your basis in the bond by adding to

your cost the OID you would have included in

income if the bond had been taxable. You need

to make this adjustment to determine if you

have a gain or loss on a later disposition of the

bond. In general, use the rules that follow to de-

termine your OID. If your tax-exempt bond is a

covered security under Regulations section

1.6045-1(a)(15), your broker will make this ad-

justment to your basis and will report the adjus-

ted basis on Form 1099-B.

Constant yield method. This discussion

shows how to figure OID on debt instruments is-

sued after 1984 using a constant yield method.

(The special rules that apply to contingent pay-

ment debt instruments and inflation-indexed

debt instruments are explained later.) OID is al-

located over the life of the debt instrument

through adjustments to the issue price for each

accrual period.

Figure the OID allocable to any accrual pe-

riod as follows.

1. Multiply the adjusted issue price at the be-

ginning of the accrual period by a fraction.

The numerator of the fraction is the debt

instrument's yield to maturity and the de-

nominator is the number of accrual

periods per year. The yield must be stated

appropriately taking into account the

length of the particular accrual period.

2. Subtract from the result in (1) any qualified

stated interest allocable to the accrual pe-

riod.

Accrual period. For debt instruments is-

sued after 1984 and before April 4, 1994, an ac-

crual period is each 6-month period that ends

on the day that corresponds to the stated ma-

turity date of the debt instrument or the date 6

months before that date. For example, a debt

instrument maturing on March 31 has accrual

periods that end on September 30 and March

31 of each calendar year. Any short period is in-

cluded as the first accrual period.

For debt instruments issued after April 3,

1994, accrual periods may be of any length and

may vary in length over the term of the debt in-

strument, as long as each accrual period is no

longer than 1 year and all payments are made

on the first or last day of an accrual period.

However, the OID listed for these debt instru-

ments in Section I-B has been figured using

6-month accrual periods.

Daily OID. The OID for any accrual period

is allocated equally to each day in the accrual

period. Figure the amount to include in income

by adding the OID for each day you hold the

debt instrument during the year. Since your tax

year will usually include parts of two or more ac-

crual periods, you must include the proper daily

OID for each accrual period. If your debt instru-

ment has 6-month accrual periods, your tax

year will usually include one full 6-month ac-

crual period and parts of two other 6-month pe-

riods.

Figuring daily OID. The daily OID for the

initial accrual period is figured using the follow-

ing formula.

(ip × ytm/n) − qsi

ip = issue price

ytm = yield to maturity

n= number of accrual periods in 1 year

qsi = qualified stated interest

p= number of days in accrual period

The daily OID for subsequent accrual peri-

ods is figured the same way except the adjus-

ted issue price at the beginning of each period

is used in the formula instead of the issue price.

Example 5. On January 1 of Year 1, you

bought a 15-year, 10% debt instrument of A

Corporation at original issue for $86,235.17. Ac-

cording to the prospectus, the debt instrument

matures on December 31 of Year 15 at a stated

redemption price of $100,000. The yield to ma-

turity is 12%, compounded semiannually. The

debt instrument provides for qualified stated in-

terest payments of $5,000 on June 30 and De-

cember 31 of each calendar year. The accrual

periods are the 6-month periods ending on

each of these dates. The number of days for the

first accrual period (January 1 through June 30)

is 181 days (182 for leap years). The daily OID

for the first accrual period is figured as follows.

($86,235.17 x .12/2) – $5,000

181 days

=$174.11020 = $.96193

181

The adjusted issue price at the beginning of

the second accrual period is the issue price

plus the OID previously includible in income

($86,235.17 + $174.11), or $86,409.28. The

number of days for the second accrual period

(July 1 through December 31) is 184 days. The

daily OID for the second accrual period is fig-

ured as follows.

($86,409.28 x .12/2) – $5,000

184 days

=$184.55681 = $1.00303

184

Since the first and second accrual periods

coincide exactly with your tax year, you include

in income for Year 1 the OID allocable to the

first two accrual periods, $174.11 ($.95665 ×

182 days) plus $184.56 ($1.00303 × 184 days),

or $358.67. Add the OID to the $10,000 interest

you report on your income tax return for Year 1.

Example 6. Assume the same facts as in

Example 5, except that you bought the debt in-

strument at original issue on May 1 of Year 1,

with a maturity date of April 30, Year 16. Also,

the interest payment dates are October 31 and

April 30 of each calendar year. The accrual pe-

riods are the 6-month periods ending on each

of these dates.

The number of days for the first accrual pe-

riod (May 1 through October 31) is 184 days.

The daily OID for the first accrual period is fig-

ured as follows.

($86,235.17 x .12/2) – $5,000

184 days

=$174.11020 = $.94625

184

The number of days for the second accrual

period (November 1 through April 30) is 181

days (182 for leap years). The daily OID for the

second accrual period is figured as follows.

($86,409.28 x .12/2) – $5,000

181 days

=$184.55681 = $1.01965

181

If you hold the debt instrument through the

end of Year 1, you must include $236.31 of OID

in income. This is $174.11 ($.94625 × 184

days) for the period May 1 through October 31

plus $62.20 ($1.01965 × 61 days) for the period

November 1 through December 31. The OID is

added to the $5,000 interest income paid on

October 31 of Year 1. Your basis in the debt

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Publication 1212 (January 2018) Page 9

instrument is increased by the OID you include

in income. On January 1 of Year 2, your basis in

the A Corporation debt instrument is

$86,471.48 ($86,235.17 + $236.31).

Short first accrual period. You may have

to make adjustments if a debt instrument has a

short first accrual period. For example, a debt

instrument with 6-month accrual periods that is

issued on February 15 and matures on October

31 has a short first accrual period that ends

April 30. (The remaining accrual periods begin

on May 1 and November 1.) For this short pe-

riod, figure the daily OID as described earlier,

but adjust the yield for the length of the short

accrual period. You may use any reasonable

compounding method in determining OID for a

short period. Examples of reasonable com-

pounding methods include continuous com-

pounding and monthly compounding (that is,

simple interest within a month). Consult your tax

advisor for more information about making this

computation.

The OID for the final accrual period is the

difference between the amount payable at ma-

turity (other than a payment of qualified stated

interest) and the adjusted issue price at the be-

ginning of the final accrual period.

Reduction for acquisition premium. If you

bought the debt instrument at an acquisition

premium, unless you made the constant yield

election under Regulations section 1.1272-3,

figure the OID includible in income by reducing

the daily OID by the daily acquisition premium.

To figure the daily acquisition premium, multiply

the daily OID by the following fraction.

The numerator is the acquisition premium.

The denominator is the total OID remaining

for the debt instrument after your purchase

date.

Example 7. Assume the same facts as in

Example 6, except that you bought the debt in-

strument on November 1 of Year 1 for $87,000,

after its original issue on May 1 of Year 1. The

adjusted issue price on November 1 of Year 1 is

$86,409.28 ($86,235.17 + $174.11). In this

case, you paid an acquisition premium of

$590.72 ($87,000 − $86,409.28). The daily OID

for the accrual period November 1 through April

30, reduced for the acquisition premium, is fig-

ured as follows.

1) Daily OID on date of purchase

(2nd accrual period) .......... $1.01965*

2) Acquisition

premium .......... $590.72

3) Total OID remaining

after purchase date

($13,764.83

− $174.11) ........$13,590.72

4) Line 2 ÷ line 3 ............... .04346

5) Line 1 × line 4 ............... .04432

6) Daily OID reduced for the

acquisition premium. Line 1

− line 5 ............... $0.97533

* As shown in Example 6.

The total OID to include in income for Year 1

is $59.50 ($.97533 × 61 days).

Contingent Payment

Debt Instruments

This discussion shows how to figure OID on a

contingent payment debt instrument issued af-

ter August 12, 1996, that was issued for cash or

publicly traded property. In general, a contin-

gent payment debt instrument provides for one

or more payments that are contingent as to tim-

ing or amount. If you hold a contingent payment

bond, you must report OID as it accrues each

year.

Contingent payment debt instruments ac-

quired on or after January 1, 2016, are “covered

securities.” Dispositions of covered and non-

covered securities must be reported on Form

8949, Sales and Other Dispositions of Capital

Assets. The gain or loss on these securities

subject to the noncontingent bond method will

be adjusted by any amounts shown in column

(g) with a corresponding code O in column (f).

In general, the gain from the sale of these se-

curities will be ordinary and losses will be ordi-

nary to the extent of prior year OID inclusions.

Because the actual payments on a contin-

gent payment debt instrument cannot be known

in advance, issuers and holders cannot use the

constant yield method (discussed earlier under

Debt Instruments Issued After 1984) without

making certain assumptions about the pay-

ments on the debt instrument. To figure OID ac-

cruals on contingent payment debt instruments,

holders and issuers must use the noncontingent

bond method.

Noncontingent bond method. Under this

method, the issuer must compute a comparable

yield for the debt instrument and, based on this

yield, construct a projected payment schedule

for the instrument, which includes a projected

fixed amount for each contingent payment. In

general, holders and issuers accrue OID on this

projected payment schedule using the constant

yield method that applies to fixed payment debt

instruments. When a contingent payment differs

from the projected fixed amount, the holders

and issuers make adjustments to their OID ac-

cruals. If the actual contingent payment is larger

than expected, both the issuer and the holder

increase their OID accruals. If the actual contin-

gent payment is smaller than expected, holders

and issuers generally decrease their OID ac-

cruals.

Form 1099-OID. The amount shown on Form

1099-OID in box 1 you receive for a contingent

payment debt instrument may not be the correct

amount to include in income. For example, the

amount may not be correct if the contingent

payment was different from the projected

amount. If the amount in box 1 is not correct,

you must figure the OID to report on your return

under the following rules. For information on

showing an OID adjustment on your tax return,

see How To Report OID, earlier.

Figuring OID. To figure OID on a contingent

payment debt instrument, you need to know the

“comparable yield” and “projected payment

schedule” of the debt instrument. The issuer

must make these available to you.

Comparable yield. The comparable yield

generally is the yield at which the issuer would

issue a fixed rate debt instrument with terms

and conditions similar to those of the contingent

payment debt instrument. The comparable yield

is determined as of the debt instrument's issue

date.

Projected payment schedule. The projec-

ted payment schedule for a contingent payment

debt instrument includes all fixed payments due

under the instrument and a projected fixed

amount for each contingent payment. The pro-

jected payment schedule is created by the is-

suer as of the debt instrument's issue date. It is

used to determine the issuer's and holder's in-

terest accruals and adjustments.

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 In-

struments Issued After 1984 ) that applies

to fixed payment debt instruments. Use

the comparable yield as the yield to matur-

ity. In general, use the projected payment

schedule to determine the instrument's ad-

justed issue price at the beginning of each

accrual period (other than the initial pe-

riod). 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 adjust-

ment. 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 nega-

tive 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 in-

cluded 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 adjust-

ment 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 pos-

itive adjustments. Decrease your basis by any

noncontingent payment received and the pro-

jected contingent payment scheduled to be re-

ceived.

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Page 10 Publication 1212 (January 2018)

Treatment of gain or loss on sale or ex-

change. If you sell a contingent payment debt

instrument at a gain, your gain is ordinary in-

come (interest income), even if you hold the

debt instrument as a capital asset. If you sell a

contingent payment debt instrument at a loss,

your loss is an ordinary loss to the extent of

your prior OID accruals on the debt instrument.

If the debt instrument is a capital asset, treat

any loss that is more than your prior OID ac-

cruals as a capital loss.

See Regulations section 1.1275-4 for ex-

ceptions to these rules.

Premium, acquisition premium, and market

discount. The rules for accruing premium, ac-

quisition premium, and market discount do not

apply to a contingent payment debt instrument.

See Regulations section 1.1275-4 to determine

how to account for these items.

Inflation-Indexed Debt Instruments

This discussion shows how you figure OID on

certain inflation-indexed debt instruments is-

sued after January 5, 1997. An inflation-indexed

debt instrument is generally a debt instrument

on which the payments are adjusted for inflation

and deflation (such as Treasury inflation-protec-

ted securities (TIPS)).

In general, if you hold an inflation-indexed

debt instrument, you must report as OID any in-

crease in the inflation-adjusted principal amount

of the debt instrument that occurs while you

held the debt instrument during the tax year.

You must include the OID in gross income

whether or not you hold the debt instrument as

a capital asset. Your basis in the debt instru-

ment is increased by the OID you include in in-

come.

Inflation-indexed debt instruments acquired

on or after January 1, 2016, are “covered secur-

ities.” Dispositions of covered and noncovered

securities must be reported on Form 8949,

Sales and Other Dispositions of Capital Assets.

Inflation-adjusted principal amount. For any

date, the inflation-adjusted principal amount of

an inflation-indexed debt instrument is the debt

instrument's outstanding principal amount multi-

plied by the index ratio for that date. (For TIPS,

multiply the par value by the index ratio for that

date.) For this purpose, determine the outstand-

ing principal amount as if there were no inflation

or deflation over the term of the debt instru-

ment.

Index ratio. This is a fraction, the numera-

tor of which is the value of the reference index

for the date and the denominator of which is the

value of the reference index for the debt instru-

ment's issue date.

A qualified reference index measures infla-

tion and deflation over the term of a debt instru-

ment. Its value is reset each month to a current

value of a single qualified inflation index (for ex-

ample, the nonseasonally adjusted U.S. City

Average All Items Consumer Price Index for All

Urban Consumers (CPI-U), published by the

Department of Labor). The value of the index

for any date between reset dates is determined

through straight-line interpolation.

The daily index ratios for Treasury in-

flation-protected securities are availa-

ble on the Internet at http://

www.treasurydirect.gov/instit/annceresult/

tipscpi/tipscpi.htm.

Form 1099-OID. The amount shown in box 8

of the Form 1099-OID you receive for an infla-

tion-indexed debt instrument may not be the

correct amount to include in income. For exam-

ple, the amount may not be correct if you

bought the debt instrument other than at original

issue or sold it during the year. If the amount

shown in box 8 is not correct, you must figure

the OID to report on your return under the fol-

lowing rules. For information about showing an

OID adjustment on your tax return, see How To

Report OID, earlier.

Figuring OID. Figure the OID on an infla-

tion-indexed debt instrument using one of the

following methods.

The coupon bond method, described in

the following discussion, applies if the debt

instrument is issued at par (as determined

under Regulations section 1.1275-7(d)(2)

(i)), all stated interest payable on the debt

instrument is qualified stated interest, and

the coupons have not been stripped from

the debt instrument. This method applies

to TIPS, including TIPS issued with more

than a de minimis amount of premium (see

Regulations section 1.1275-7).

The discount bond method applies to

any inflation-indexed debt instrument that

does not qualify for the coupon bond

method, such as a stripped debt instru-

ment. This method is described in Regula-

tions section 1.1275-7(e).

Under the coupon bond method, figure the

OID you must report for the tax year as follows.

Debt instrument held at the end of the

tax year. If you held the debt instrument at the

end of the tax year, figure your OID for the year

using the following steps.

1. Add the inflation-adjusted principal

amount for the day after the last day of the

tax year and any principal payments you

received during the year. (For TIPS, multi-

ply the par value by the index ratio for the

day after the last day of the tax year, and

add any principal payments received.)

2. Subtract from (1) above the inflation-ad-

justed principal amount for the first day on

which you held the debt instrument during

the tax year. (For TIPS, subtract from (1)

above the product of the par value times

the index ratio for the first day held during

the tax year.)

Interest is reported separately, as discussed

later under Stated interest.

Debt instrument sold or retired during

the tax year. If you sold the debt instrument

during the tax year, or if it was retired, figure

your OID for the year using the following steps.

1. Add the inflation-adjusted principal

amount for the last day on which you held

the debt instrument during the tax year

and any principal payments you received

during the year. (For TIPS, multiply the par

value by the index ratio for the sale or re-

tirement date, and add any principal pay-

ments received.)

2. Subtract from (1) above the inflation-ad-

justed principal amount for the first day on

which you held the debt instrument during

the tax year. (For TIPS, subtract from (1)

above the product of the par value times

the index ratio for the first day held during

the tax year.)

Interest is reported separately, as discussed

later under Stated interest.

Example 8. On February 6 of Year 9, you

bought an old 10-year, 3.375% inflation-in-

dexed debt instrument (maturing January 15 of

Year 11) for $9,831. The stated principal (par

value) amount is $10,000 and the inflation-ad-

justed principal amount for February 6 of Year 9

is $12,047.50 ($10,000 par value times 1.20475

index ratio). You held the debt instrument until

August 29 of Year 9 when the inflation-adjusted

principal amount was $12,275.70 ($10,000 par

value times 1.22757 index ratio). Your OID for

Year 9 is $228.20 ($12,275.70 − $12,047.50).

Your basis in the debt instrument on August 29

of Year 9 was $10,059.20 ($9,831 cost +

$228.20 OID) for Year 9.

Stated interest. Under the coupon bond

method, you report any stated interest on the

debt instrument under your regular method of

accounting. For example, if you use the cash

method, you generally include in income for the

tax year any interest payments received on the

debt instrument during the year.

Deflation adjustments. If your calculation to

figure OID on an inflation-indexed debt instru-

ment produces a negative number, you do not

have any OID. Instead, you have a deflation ad-

justment. A deflation adjustment generally is

used to offset interest income from the debt in-

strument for the tax year. Show this offset as an

adjustment on your Form 1040, Schedule B, in

the same way you would show an OID adjust-

ment. See How To Report OID, earlier.

You decrease your basis in the debt instru-

ment by the deflation adjustment used to offset

interest income.

Example 9. Assume the same facts as in

Example 8, except that you bought the debt in-

strument for $9,831 on January 6 of Year 9,

when the inflation-adjusted principal amount

was $12,050.10, and sold the debt instrument

on March 1 of Year 9, when the inflation-adjus-

ted principal amount was $12,011.20. Because

the OID calculation for Year 9 ($12,011.20 −

$12,050.10) produces a negative number (neg-

ative $38.90), you have a deflation adjustment.

You use this deflation adjustment to offset the

stated interest reported to you on the debt in-

strument.

Your basis in the debt instrument on March

1 of Year 9 is $9,792.10 ($9,831 cost − $38.90

deflation adjustment) for Year 9.

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Publication 1212 (January 2018) Page 11

Premium on inflation-indexed debt instru-

ments. In general, any premium on an infla-

tion-indexed debt instrument is determined as

of the date you acquire the debt instrument by

assuming there will be no further inflation or de-

flation over the remaining term of the debt in-

strument. You allocate any premium over the

remaining term of the debt instrument by mak-

ing the same assumption. In general, the pre-

mium allocable to a tax year offsets the interest

otherwise includible in income for the year. If

the premium allocable to the year is more than

that interest, the difference generally offsets the

OID on the debt instrument for the year. See

Regulations section 1.1275-7 for an example

applying the coupon bond method to a TIPS is-

sued with more than a de minimis amount of

premium.

Figuring OID on Stripped

Bonds and Coupons

If you strip one or more coupons from a bond

and then sell or otherwise dispose of the bond

or the stripped coupons, they are treated as

separate debt instruments issued with OID. The

holder of a stripped bond has the right to re-

ceive the principal (redemption price) payment.

The holder of a stripped coupon has the right to

receive an interest payment on the bond. The

rule requiring the holder of a debt instrument is-

sued with OID to include the OID in gross in-

come as it accrues applies to stripped bonds

and coupons acquired after July 1, 1982. See

Debt Instruments and Coupons Purchased Af-

ter July 1, 1982, and Before 1985 or Debt In-

struments and Coupons Purchased After 1984,

later, for information about figuring the OID to

report.

Stripped bonds and coupons include the fol-

lowing instruments.

Zero coupon bonds available through the

Department of the Treasury's STRIPS pro-

gram and government-sponsored enterpri-

ses such as the Resolution Funding Cor-

poration and the Financing Corporation.

Debt instruments backed by U.S. Treasury

securities that represent ownership inter-

ests in those securities. Examples include

obligations backed by U.S. Treasury

bonds that are offered primarily by broker-

age firms (variously called CATS, TIGRs,

etc.).

Seller of stripped bonds or coupons. If you

strip coupons from a bond and sell the bond or

coupons, include in income the interest that ac-

crued while you held the bond before the date

of sale to the extent the interest was not previ-

ously included in your income. For an obligation

acquired after October 22, 1986, you must also

include the market discount that accrued before

the date of sale of the stripped bond (or cou-

pon) to the extent the discount was not previ-

ously included in your income.

Add the interest and market discount you in-

clude in income to the basis of the bond and

coupons. This adjusted basis is then allocated

between the items you keep and the items you

sell, based on the fair market value of the items.

The difference between the sale price of the

bond (or coupon) and the allocated basis of the

bond (or coupon) is the gain or loss from the

sale.

Treat any item you keep as an OID bond

originally issued and purchased by you on the

sale date of the other items. If you keep the

bond, treat the excess of the redemption price

of the bond over the basis of the bond as OID. If

you keep the coupons, treat the excess of the

amount payable on the coupons over the basis

of the coupons as OID.

Purchaser of stripped bonds or coupons. If

you purchase a stripped bond or coupon, treat it

as if it were originally issued on the date of pur-

chase. If you purchase the stripped bond, treat

as OID any excess of the stated redemption

price at maturity over your purchase price. If

you purchase the stripped coupon, treat as OID

any excess of the amount payable on the due

date of the coupon over your purchase price.

Form 1099-OID

The amount shown in box 8 of the Form

1099-OID you receive for a stripped bond or

coupon may not be the proper amount to in-

clude in income. If not, you must figure the OID

to report on your return under the rules that fol-

low. For information about showing an OID ad-

justment on your tax return, see How To Report

OID, earlier.

Tax-Exempt Bonds and Coupons

The OID on a stripped tax-exempt bond, or on a

stripped coupon from such a bond, is generally

not taxable. However, if you acquired the strip-

ped bond or coupon after October 22, 1986,

you must accrue OID on it to determine its basis

when you dispose of it. How you figure accrued

OID and whether any OID is taxable depend on

the date you bought (or are treated as having

bought) the stripped bond or coupon.

Acquired before June 11, 1987. None of the

OID on bonds or coupons acquired before this

date is taxable. The accrued OID is added to

the basis of the bond or coupon. The accrued

OID is the amount that produces a yield to ma-

turity (YTM), based on your purchase date and

purchase price, equal to the lower of the follow-

ing rates.

1. The coupon rate on the bond before the

separation of coupons. (However, if you

can establish the YTM of the bond (with all

coupons attached) at the time of its origi-

nal issue, you can use that YTM instead.)

2. The YTM of the stripped bond or coupon.

Increase your basis in the stripped tax-ex-

empt bond or coupon by the interest that ac-

crued but was neither paid nor previously re-

flected in your basis before the date you sold

the bond or coupon.

Acquired after June 10, 1987. Part of the

OID on bonds or coupons acquired after this

date may be taxable. Figure the taxable part in

three steps.

Step 1. Figure OID as if all taxable. First

figure the OID following the rules in this section

as if all the OID were taxable. (See Debt

Instruments and Coupons Purchased After

1984, later.) Use the yield to maturity (YTM)

based on the date you obtained the stripped

bond or coupon.

Step 2. Determine nontaxable part. Find

the issue price that would produce a YTM as of

the purchase date equal to the lower of the fol-

lowing rates.

1. The coupon rate on the bond from which

the coupons were separated. (However,

you can use the original YTM instead.)

2. The YTM based on the purchase price of

the stripped coupon or bond.

Subtract this issue price from the stated re-

demption price of the bond at maturity (or, in the

case of a coupon, the amount payable on the

due date of the coupon). The result is the part of

the OID treated as OID on a stripped tax-ex-

empt bond or coupon.

Step 3. Determine taxable part. The taxa-

ble part of OID is the OID determined in Step 1

minus the nontaxable part determined in Step

Exception. None of the OID on your strip-

ped tax-exempt bond or coupon is taxable if

you bought it from a person who held it for sale

on June 10, 1987, in the ordinary course of that

person's trade or business.

Basis adjustment. Increase the basis of

your stripped tax-exempt bond or coupon by

the taxable and nontaxable accrued OID. If you

own a tax-exempt bond from which one or more

coupons have been stripped, increase your ba-

sis in it by the sum of the interest accrued but

not paid before you dispose of it (and not previ-

ously reflected in basis) and any accrued mar-

ket discount to the extent not previously inclu-

ded in your income.

Example 10. Assume that a tax-exempt

bond with a face amount of $100 due January 1

of Year 4 and a coupon rate of 10% (compoun-

ded semiannually) was issued for $100 on Jan-

uary 1 of Year 1. On January 1 of Year 2 the

bond was stripped and you bought the right to

receive the principal amount for $79.21. The

stripped bond is treated as if it was originally is-

sued on January 1 of Year 2 with OID of $20.79

($100.00 − $79.21). This reflects a YTM at the

time of the strip of 12% (compounded semiann-

ually). The tax-exempt part of OID on the strip-

ped bond is limited to $17.73. This is the differ-

ence between the redemption price ($100) and

the issue price that would produce a YTM of

10% ($82.27). This part of the OID is treated as

OID on a tax-exempt obligation.

The OID on the stripped bond that is more

than the tax-exempt part is $3.06. This is the

excess of the total OID ($20.79) over the

tax-exempt part ($17.73). This part of the OID

($3.06) is treated as OID on an obligation that is

not tax exempt.

The total OID allocable to the accrual period

ending June 30 of Year 2 is $4.75 (6% ×

$79.21). Of this, $4.11 (5% × $82.27) is treated

as OID on a tax-exempt obligation and $0.64

($4.75 − $4.11) is treated as OID on an obliga-

tion that is not tax exempt. Your basis in the

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Page 12 Publication 1212 (January 2018)

debt instrument as of June 30 of Year 2 is in-

creased to $83.96 ($79.21 issue price + ac-

crued OID of $4.75).

Debt Instruments and Coupons

Purchased After July 1, 1982, and

Before 1985

If you purchased a stripped bond or coupon af-

ter July 1, 1982, and before 1985, and you held

that debt instrument as a capital asset during

any part of a calendar year, you must figure the

OID to be included in income using a constant

yield method. Under this method, OID is alloca-

ted over the time you hold the debt instrument

by adjusting the acquisition price for each ac-

crual period. The OID for the accrual period is

figured by multiplying the adjusted acquisition

price at the beginning of the period by the yield

to maturity.

Adjusted acquisition price. The adjusted ac-

quisition price of a stripped bond or coupon at

the beginning of the first accrual period is its

purchase (or acquisition) price. The adjusted

acquisition price at the beginning of any subse-

quent accrual period is the sum of the acquisi-

tion price and all of the OID includible in income

before that accrual period.

Accrual period. An accrual period for any

stripped bond or coupon acquired before 1985

is each year period beginning on the date of the

purchase of the obligation and each anniver-

sary thereafter, or the shorter period to maturity

for the last accrual period.

Yield to maturity (YTM). In general, the YTM

of a stripped bond or coupon is the discount

rate that, when used in figuring the present

value of all principal and interest payments, pro-

duces an amount equal to the acquisition price

of the debt instrument or coupon.

Figuring YTM. If you purchased a stripped

bond or coupon after July 1, 1982, but before

1985, and the period from your purchase date

to the day the debt instrument matures can be

divided exactly into full 1-year periods without

including a shorter period, then the YTM can be

figured by applying the following formula.

srp

()–1

srp = stated redemption price at maturity

ap = acquisition price

m= number of full accrual periods from

purchase to maturity

If the debt instrument is a stripped coupon,

the stated redemption price is the amount paya-

ble on the due date of the coupon.

If the period between your purchase date

and the maturity date (or due date) of the debt

instrument does not divide into an exact num-

ber of full 1-year periods, so that a period

shorter than 1 year must be included, consult

your broker or your tax advisor for information

about figuring the YTM.

Daily OID. The OID for any accrual period is

allocated equally to each day in the accrual pe-

riod. You figure the amount to include in income

by adding the daily OID amounts for each day

you hold the debt instrument during the year. If

your tax year includes parts of more than one

accrual period (which will be the case unless

the accrual period coincides with your tax year),

you must include the proper daily OID amounts

for each of the two accrual periods.

The daily OID for the initial accrual period is

figured by applying the following formula.

(ap × ytm)

ap = acquisition price

ytm = yield to maturity

p= number of days in accrual period

The daily OID for subsequent accrual peri-

ods is figured in the same way except the ad-

justed acquisition price at the beginning of each

period is used in the formula instead of the ac-

quisition price.

The rules for figuring OID on these debt in-

struments are similar to those in Debt Instru-

ments Issued After July 1, 1982, and Before

1985, earlier.

Debt Instruments and Coupons

Purchased After 1984

If you purchased a stripped bond or coupon

(other than a stripped inflation-indexed debt in-

strument) after 1984, and you held that debt in-

strument during any part of a calendar year, you

must figure the OID to be included in income

using a constant yield method. Under this

method, OID is allocated over the time you hold

the debt instrument by adjusting the acquisition

price for each accrual period. The OID for the

accrual period is figured by multiplying the ad-

justed acquisition price at the beginning of the

period by a fraction. The numerator of the frac-

tion is the debt instrument's yield to maturity

and the denominator is the number of accrual

periods per year.

If the stripped bond or coupon is an infla-

tion-indexed instrument, you must figure the

OID to be included in income using the discount

bond method described in Regulations section

1.1275-7(e).

Adjusted acquisition price. The adjusted ac-

quisition price of a stripped bond or coupon at

the beginning of the first accrual period is its

purchase (or acquisition) price. The adjusted

acquisition price at the beginning of any subse-

quent accrual period is the sum of the acquisi-

tion price and all of the OID includible in income

before that accrual period.

Accrual period. For a stripped bond or cou-

pon acquired after 1984 and before April 4,

1994, an accrual period is each 6-month period

that ends on the day that corresponds to the

stated maturity date of the stripped bond (or

payment date of a stripped coupon) or the date

6 months before that date. For example, a strip-

ped bond that has a maturity date (or a stripped

coupon that has a payment date) of March 31

has accrual periods that end on September 30

and March 31 of each calendar year. Any short

period is included as the first accrual period.

For a stripped bond or coupon acquired af-

ter April 3, 1994, accrual periods may be of any

length and may vary in length over the term of

the debt instrument, as long as each accrual

period is no longer than 1 year and all payments

are made on the first or last day of an accrual

period.

Yield to maturity (YTM). In general, the YTM

of a stripped bond or coupon is the discount

rate that, when used in figuring the present

value of all principal and interest payments, pro-

duces an amount equal to the acquisition price.

Figuring YTM. How you figure the YTM for

a stripped debt instrument or coupon pur-

chased after 1984 depends on whether you

have equal accrual periods or a short initial ac-

crual period.

1. Equal accrual periods. If the period

from the date you purchased a stripped bond or

coupon to the maturity date can be divided

evenly into full accrual periods without including

a shorter period, you can figure the YTM by us-

ing the following formula.

srp

()

–1

)(

×n

n= number of accrual periods in 1 year

srp = stated redemption price at maturity

ap = acquisition price

m= number of full accrual periods from

purchase to maturity

If the debt instrument is a stripped coupon,

the stated redemption price is the amount paya-

ble on the due date of the coupon.

Example 11. On May 15 of Year 1, you

bought a coupon stripped from a U.S. Treasury

bond through the Department of the Treasury's

STRIPS program for $38,000. An amount of

$100,000 is payable on the coupon's due date,

November 14 of Year 13. There are exactly 25

6-month periods between the purchase date,

May 15 of Year 1, and the coupon's due date,

November 14 of Year 13. The YTM on this strip-

ped coupon is figured as follows.

$100,000

$38,000

()

)(

×2

= 2 ×(1.03946 -1) = 0.07892 = 7.892%

–1

Use 7.892% YTM to figure the OID for each

accrual period or partial accrual period for

which you must report OID.

2. Short initial accrual period. If the pe-

riod from the date you purchased a stripped

bond or coupon to the date of its maturity can-

not be divided evenly into full accrual periods,

so that a shorter period must be included, you

can figure the YTM by using the following for-

mula (the exact method).

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Publication 1212 (January 2018) Page 13

srp

() –1

)(

×n

()

n= number of accrual periods in 1 year

srp = stated redemption price at maturity

ap = acquisition price

r= number of days from purchase to end of

short accrual period

s= number of days in accrual period ending on

last day of short accrual period

m= number of full accrual periods from

purchase to maturity

Example 12. On May 30 of Year 1, you

bought a coupon stripped from a U.S. Treasury

bond through the Department of the Treasury's

STRIPS program for $60,000. $100,000 is pay-

able on the coupon's due date, August 11 of

Year 7. You decide to figure OID using 6-month

accrual periods. There are 12 full 6-month ac-

crual periods and a 74-day short initial accrual

period from the purchase date to the coupon's

due date. The YTM on this stripped coupon is

figured as follows.

+12

()

2 × (($100,000 / $60,000) -1)

= 2 ×(1.04203 -1) = .08406 = 8.406%

(74/181)

Use 8.406% YTM to figure the OID for each

accrual period or partial accrual period for

which you must report OID.

Daily OID. The OID for any accrual period is

allocated equally to each day in the accrual pe-

riod. You must include in income the sum of the

daily OID amounts for each day you hold the

debt instrument during the year. Since your tax

year will usually include parts of two or more ac-

crual periods, you must include the proper daily

OID amounts for each accrual period.

Figuring daily OID. For the initial accrual

period of a stripped bond or coupon acquired

after 1984, figure the daily OID using Formula 1,

next, if there are equal accrual periods. Use

Formula 2 if there is a short initial accrual pe-

riod.

For subsequent accrual periods, figure the

daily OID using Formula 1 (whether or not there

was a short initial accrual period), but use the

adjusted acquisition price in the formula instead

of the acquisition price.

Formula 1.

ap × ytm / n

Formula 2.

ap x (1 + ytm /n) − ap

ap = acquisition price

ytm = yield to maturity

n= number of accrual periods in 1 year

p= number of days in accrual period

r= number of days from purchase to end of

short accrual period

s= number of days in accrual period ending on

last day of short accrual period

The rules for figuring OID on these debt in-

struments are similar to those illustrated in Ex-

ample 5 and Example 6, earlier, under Debt In-

struments Issued After 1984.

Example 13. Assume the same facts as in

Example 12, and that you held the coupon for

the rest of Year 1.

For the short initial accrual period from May

30 through August 11, the daily OID is figured

using Formula 2, as follows.

181

$60,000 × (1 + .08406/2) − $60,000

=$1,018.48 = $13.76327

The OID for this period is $1,018.48

($13.76327 × 74 days).

For the second accrual period from August

12 of Year 1 through February 11 of Year 2, the

adjusted acquisition price is $61,018.48. This is

the original $60,000 acquisition price plus

$1,018.48 OID for the short initial accrual pe-

riod. The daily OID is figured using Formula 1,

as follows.

$61,018.48 × (.08406/2)

184

=$2,564.60671 = $13.93808

184

The OID for the part of this period included

in Year 1 (August 12 – December 31) is

$1,979.21 ($13.93808 × 142 days).

The OID to be reported on your income tax

return for Year 1 is $2,997.69 ($1,018.48 +

$1,979.21).

Final accrual period. The OID for the final

accrual period for a stripped bond or coupon is

the amount payable at maturity of the stripped

bond (or interest payable on the stripped cou-

pon) minus the adjusted acquisition price at the

beginning of the final accrual period. The daily

OID for the final accrual period is figured by di-

viding the OID for the period by the number of

days in the period.

How To Get Tax Help

If you have questions about a tax issue, need

help preparing your tax return, or want to down-

load free publications, forms, or instructions, go

to IRS.gov and find resources that can help you

right away.

Preparing and filing your tax return. Find

free options to prepare and file your return on

IRS.gov or in your local community if you qual-

ify.

The Volunteer Income Tax Assistance

(VITA) program offers free tax help to people

who generally make $54,000 or less, persons

with disabilities, and limited-English-speaking

taxpayers who need help preparing their own

tax returns. The Tax Counseling for the Elderly

(TCE) program offers free tax help for all tax-

payers, particularly those who are 60 years of

age and older. TCE volunteers specialize in an-

swering questions about pensions and retire-

ment-related issues unique to seniors.

You can go to IRS.gov to see your options

for preparing and filing your return which in-

clude the following.

Free File. Go to IRS.gov/FreeFile. See if

you qualify to use brand-name software to

prepare and e-file your federal tax return

for free.

VITA. Go to IRS.gov/VITA, download the

free IRS2Go app, or call 800-906-9887 to

find the nearest VITA location for free tax

preparation.

TCE. Go to IRS.gov/TCE, download the

free IRS2Go app, or call 888-227-7669 to

find the nearest TCE location for free tax

preparation.

Getting answers to your tax ques-

tions. On IRS.gov get answers to your

tax questions anytime, anywhere.

Go to IRS.gov/Help or IRS.gov/LetUsHelp

pages for a variety of tools that will help

you get answers to some of the most com-

mon tax questions.

Go to IRS.gov/ITA for the Interactive Tax

Assistant, a tool that will ask you questions

on a number of tax law topics and provide

answers. You can print the entire interview

and the final response for your records.

Go to IRS.gov/Pub17 to get Pub. 17, Your

Federal Income Tax for Individuals, which

features details on tax-saving opportuni-

ties, 2017 tax changes, and thousands of

interactive links to help you find answers to

your questions. View it online in HTML, as

a PDF, or download it to your mobile de-

vice as an eBook.

You may also be able to access tax law in-

formation in your electronic filing software.

Getting tax forms and publications. Go to

IRS.gov/Forms to view, download, or print all of

the forms and publications you may need. You

can also download and view popular tax publi-

cations and instructions (including the 1040 in-

structions) on mobile devices as an eBook at no

charge. Or, you can go to IRS.gov/OrderForms

to place an order and have forms mailed to you

within 10 business days.

Access your online account (Individual tax-

payers only). Go to IRS.gov/Account to se-

curely access information about your federal tax

account.

View the amount you owe, pay online or

set up an online payment agreement.

Access your tax records online.

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Page 14 Publication 1212 (January 2018)

Review the past 18 months of your pay-

ment history.

Go to IRS.gov/SecureAccess to review the

required identity authentication process.

Using direct deposit. The fastest way to re-

ceive a tax refund is to combine direct deposit

and IRS e-file. Direct deposit securely and elec-

tronically transfers your refund directly into your

financial account. Eight in 10 taxpayers use di-

rect deposit to receive their refund. IRS issues

more than 90% of refunds in less than 21 days.

Delayed refund for returns claiming certain

credits. Due to changes in the law, the IRS

can’t issue refunds before mid-February 2018,

for returns that properly claimed the earned in-

come credit (EIC) or the additional child tax

credit (ACTC). This applies to the entire refund,

not just the portion associated with these cred-

its.

Getting a transcript or copy of a return. The

quickest way to get a copy of your tax transcript

is to go to IRS.gov/Transcripts. Click on either

"Get Transcript Online" or "Get Transcript by

Mail" to order a copy of your transcript. If you

prefer, you can:

Order your transcript by calling

800-908-9946.

Mail Form 4506-T or Form 4506T-EZ (both

available on IRS.gov).

Using online tools to help prepare your re-

turn. Go to IRS.gov/Tools for the following.

The Earned Income Tax Credit Assistant

(IRS.gov/EIC) determines if you’re eligible

for the EIC.

The Online EIN Application (IRS.gov/EIN)

helps you get an employer identification

number.

The IRS Withholding Calculator (IRS.gov/

W4App) estimates the amount you should

have withheld from your paycheck for fed-

eral income tax purposes.

The First Time Homebuyer Credit Account

Look-up (IRS.gov/HomeBuyer) tool pro-

vides information on your repayments and

account balance.

The Sales Tax Deduction Calculator

(IRS.gov/SalesTax) figures the amount you

can claim if you itemize deductions on

Schedule A (Form 1040), choose not to

claim state and local income taxes, and

you didn’t save your receipts showing the

sales tax you paid.

Resolving tax-related identity theft issues.

The IRS doesn’t initiate contact with tax-

payers by email or telephone to request

personal or financial information. This in-

cludes any type of electronic communica-

tion, such as text messages and social me-

dia channels.

Go to IRS.gov/IDProtection for information

and videos.

If your SSN has been lost or stolen or you

suspect you’re a victim of tax-related iden-

tity theft, visit IRS.gov/ID to learn what

steps you should take.

Checking on the status of your refund.

Go to IRS.gov/Refunds.

Due to changes in the law, the IRS can’t is-

sue refunds before mid-February 2018, for

returns that properly claimed the EIC or the

ACTC. This applies to the entire refund,

not just the portion associated with these

credits.

Download the official IRS2Go app to your

mobile device to check your refund status.

Call the automated refund hotline at

800-829-1954.

Making a tax payment. The IRS uses the lat-

est encryption technology to ensure your elec-

tronic payments are safe and secure. You can

make electronic payments online, by phone,

and from a mobile device using the IRS2Go

app. Paying electronically is quick, easy, and

faster than mailing in a check or money order.

Go to IRS.gov/Payments to make a payment

using any of the following options.

IRS Direct Pay: Pay your individual tax bill

or estimated tax payment directly from

your checking or savings account at no

cost to you.

Debit or credit card: Choose an ap-

proved payment processor to pay online,

by phone, and by mobile device.

Electronic Funds Withdrawal: Offered

only when filing your federal taxes using

tax preparation software or through a tax

professional.

Electronic Federal Tax Payment Sys-

tem: Best option for businesses. Enroll-

ment is required.

Check or money order: Mail your pay-

ment to the address listed on the notice or

instructions.

Cash: You may be able to pay your taxes

with cash at a participating retail store.

What if I can’t pay now? Go to IRS.gov/

Payments for more information about your op-

tions.

Apply for an online payment agreement

(IRS.gov/OPA) to meet your tax obligation

in monthly installments if you can’t pay

your taxes in full today. Once you complete

the online process, you will receive imme-

diate notification of whether your agree-

ment has been approved.

Use the Offer in Compromise Pre-Qualifier

(IRS.gov/OIC) to see if you can settle your

tax debt for less than the full amount you

owe.

Checking the status of an amended return.

Go to IRS.gov/WMAR to track the status of

Form 1040X amended returns. Please note that

it can take up to 3 weeks from the date you

mailed your amended return for it to show up in

our system and processing it can take up to 16

weeks.

Understanding an IRS notice or letter. Go to

IRS.gov/Notices to find additional information

about responding to an IRS notice or letter.

Contacting your local IRS office. Keep in

mind, many questions can be answered on

IRS.gov without visiting an IRS Tax Assistance

Center (TAC). Go to IRS.gov/LetUsHelp for the

topics people ask about most. If you still need

help, IRS TACs provide tax help when a tax is-

sue can’t be handled online or by phone. All

TACs now provide service by appointment so

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ices, and appointment options. Or, on the

IRS2Go app, under the Stay Connected tab,

choose the Contact Us option and click on “Lo-

cal Offices.”

Watching IRS videos. The IRS Video portal

(IRSvideos.gov) contains video and audio pre-

sentations for individuals, small businesses,

and tax professionals.

Getting tax information in other languages.

For taxpayers whose native language isn’t Eng-

lish, we have the following resources available.

Taxpayers can find information on IRS.gov in

the following languages.

Spanish (IRS.gov/Spanish).

Chinese (IRS.gov/Chinese).

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Russian (IRS.gov/Russian).

The IRS TACs provide over-the-phone inter-

preter service in over 170 languages, and the

service is available free to taxpayers.

The Taxpayer Advocate

Service Is Here To Help You

What is the Taxpayer Advocate

Service?

The Taxpayer Advocate Service (TAS) is an in-

dependent organization within the IRS that

helps taxpayers and protects taxpayer rights.

Our job is to ensure that every taxpayer is trea-

ted fairly and that you know and understand

your rights under the Taxpayer Bill of Rights.

What Can the Taxpayer Advocate

Service Do For You?

We can help you resolve problems that you

can’t resolve with the IRS. And our service is

free. If you qualify for our assistance, you will be

assigned to one advocate who will work with

you throughout the process and will do every-

thing possible to resolve your issue. TAS can

help you if:

Your problem is causing financial difficulty

for you, your family, or your business,

You face (or your business is facing) an

immediate threat of adverse action, or

You’ve tried repeatedly to contact the IRS

but no one has responded, or the IRS

hasn’t responded by the date promised.

How Can You Reach Us?

We have offices in every state, the District of

Columbia, and Puerto Rico. Your local advo-

cate’s number is in your local directory and at

TaxpayerAdvocate.IRS.gov/Contact-Us. You

can also call us at 877-777-4778.

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Publication 1212 (January 2018) Page 15

How Can You Learn About Your

Taxpayer Rights?

The Taxpayer Bill of Rights describes 10 basic

rights that all taxpayers have when dealing with

the IRS. Our Tax Toolkit at

TaxpayerAdvocate.IRS.gov can help you un-

derstand what these rights mean to you and

how they apply. These are your rights. Know

them. Use them.

How Else Does the Taxpayer

Advocate Service Help Taxpayers?

TAS works to resolve large-scale problems that

affect many taxpayers. If you know of one of

these broad issues, please report it to us at

IRS.gov/SAMS.

Low Income Taxpayer

Clinics

Low Income Taxpayer Clinics (LITCs) are inde-

pendent from the IRS. LITCs represent individu-

als whose income is below a certain level and

need to resolve tax problems with the IRS, such

as audits, appeals, and tax collection disputes.

In addition, clinics can provide information

about taxpayer rights and responsibilities in dif-

ferent languages for individuals who speak

English as a second language. Services are of-

fered for free or a small fee. To find a clinic near

you, visit TaxpayerAdvocate.IRS.gov/LITCmap

or see IRS Publication 4134, Low Income

Taxpayer Clinic List.

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Page 16 Publication 1212 (January 2018)

To help us develop a more useful index, please let us know if you have ideas for index entries.

See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Index

Accrual period 2

Acquisition premium 2

Adjusted issue price 2

Assistance (See Tax help)

Backup withholding 4

Bearer bonds and coupons 4

Brokers (See Information for

brokers and other middlemen)

Certificates of deposit 4

Comments and suggestions 2

Contingent payment debt

instruments 10

Debt instrument 2

Debt instruments:

Long-term 4

Short-term 3

Debt instruments and coupons

purchased after 1984 13

Debt instruments and coupons

purchased after July 1, 1982,

and before 1985 13

Debt instruments issued after

1984 8

Debt instruments issued after

July 1, 1982 7

Debt instruments not on the OID

list 3

Debt Instruments on the OID

list 3

Definitions 2

Accrual period 2

Acquisition premium 2

Adjusted issue price 2

Debt instrument 2

Issue price 2

Market discount 2

Original issue discount (OID) 2

Premium 2

Qualified stated interest 3

Stated redemption price at

maturity 3

Yield to maturity 3

Electronic payee statements 3

Form 1099-OID 4

Identity theft 15

Inflation-indexed debt

instruments 11

Information for brokers and other

middlemen 3

Information for owners of OID

debt instruments 5

Issue price 2

Issuers of OID debt instruments,

Instructions for 2

Long-term debt instruments 4

Market discount 2

OID, figuring 4

Using section I 4

Using the income tax

regulations 4

OID list, Debt Instruments on 3

OID on long-term debt

instruments, figuring 7

OID on stripped bonds and

coupons, figuring 12

Original issue discount (OID) 2

Owners of OID debt instruments,

information for 5

Premium 2

Publications (See Tax help)

Qualified stated interest 3

REMIC and CDO information

reporting requirements 2

Section I 3

Section II 3

Section III 3

Short-term obligations redeemed

at maturity 3

Stated redemption price at

maturity 3

Stripped bonds and coupons,

figuring OID 12

Suggestions, Comments and 2

Tax help 14

Yield to maturity 3, 13

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Publication 1212 (January 2018) Page 17

Publication 1212 (Rev. January 2018) P1212

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