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deemed. This noncompetitive discount price is

Figuring OID. You can determine the OID on

The payee is a foreign person. See Pay-

a long-term debt instrument by using either of

ments to foreign person under Backup

the issue price (expressed as a percent of princi-

the following.

Withholding, later.

pal) shown in Section III – A.

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A similar rule is used to figure the discount on

Because you cannot assume the presenter of

Section I of the OID list.

short-term discount obligations issued by the

the coupon also owns the bond, you should not

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The income tax regulations.

organizations listed in Section III – B through

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

Section III – G.

coupon may have been “stripped” (separated)

Using Section I. If the owner held the debt

from the bond and separately purchased.

instrument for the entire calendar year, report

Example 1.

There are 13-week and

However, if a long-term bearer bond on the

the OID shown in Section I for the calendar year.

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

Because OID is listed for each $1,000 of stated

OID list in this publication is presented to you for

the T-bill being redeemed. The price actually

redemption upon call or maturity, you should

redemption price at maturity, you must adjust

paid by the owner cannot be established by

the listed amount to reflect the instrument’s ac-

prepare a Form 1099 – OID showing the OID for

owner or middleman records. You treat as the

that calendar year, as well as any coupon inter-

tual stated redemption price at maturity. For

issue price of the T-bill the noncompetitive dis-

est payments collected at the time of redemp-

example, if the instrument’s stated redemption

count price (expressed as a percent of principal)

tion.

price at maturity is $500, report one-half the

shown in Section III – A for a 26-week bill matur-

listed OID.

ing on the same date as the T-bill redeemed.

Backup Withholding

If the owner held the debt instrument for less

The interest you report on Form 1099 – INT is

than the entire calendar year, figure the OID to

the discount (per $1,000 of principal) shown in

If you report OID on Form 1099 – OID or interest

report as follows.

Section III – A for that obligation.

on Form 1099 – INT for 2002, you may be re-

1) Look up the daily OID for the first 2002

quired to apply backup withholding to the report-

accrual period during which the owner held

Long-Term

able payment at a rate of 30%. The backup

the instrument.

withholding tax is deducted at the time a cash

Debt Instruments

payment is made.

2) Multiply the daily OID by the number of

Backup withholding generally applies in the

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

days in 2002 the owner held the instru-

following situations.

nominee for the true owner, you generally must

ment during that accrual period.

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

1) The payee does not give you a taxpayer

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

rely on Section I of the OID list to determine the

identification number (TIN).

2002 accrual periods during which the

following information.

owner held the instrument.

2) The IRS notifies you that the payee gave

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Whether an instrument has OID.

an incorrect TIN.

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

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termine the owner’s OID per $1,000 of

The OID to be reported on the Form

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

stated redemption price at maturity.

1099 – OID.

ject to backup withholding due to payee

underreporting.

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

In general, you must report OID on publicly of-

the instrument’s stated redemption price at

fered, long-term debt instruments listed in Sec-

4) For debt instruments acquired after 1983:

maturity.

tion I. You also may report OID on other

a) The payee does not certify, under pen-

long-term debt instruments.

Report the result in box 1 of Form 1099 – OID.

alties of perjury, that he or she is not

Using the income tax regulations. Instead

subject to backup withholding under

Form 1099 – OID. On Form 1099 – OID for

of using Section I to figure OID, you can use the

(3).

2002, show the following information.

regulations under sections 1272 through 1275 of

b) The payee does not certify, under pen-

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the Internal Revenue Code. For example, under

Box 1. The OID for the actual dates the

alties of perjury, that the TIN given is

the regulations, you can use monthly accrual

owner held the instruments during 2002.

correct.

periods in figuring OID for a debt instrument

To determine this amount, see Figuring

issued after April 3, 1994, that provides for

OID, next.

However, for short-term discount obligations

monthly payments. (If you use Section I – B, the

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(other than government obligations), bearer

Box 2. The qualified stated interest paid or

OID is figured using 6-month accrual periods.)

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

credited during the calendar year. Interest

For a general explanation of the rules for

withholding applies only if the payee does not

reported here is not reported on Form

figuring OID under the regulations, see Figuring

give you a TIN or gives you an obviously incor-

1099 – INT. The qualified stated interest on

OID on Long-Term Debt Instruments under In-

rect number for a TIN.

Treasury inflation-indexed securities may

formation for Owners of OID Debt Instruments,

be reported in box 3 of Form 1099 – INT

later.

Short-term obligations. Backup withholding

instead.

applies to OID on a short-term obligation only

Certificates of Deposit

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when the OID is paid at maturity. However,

Box 3. Any interest or principal forfeited

backup withholding applies to any interest pay-

because of an early withdrawal that the

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

able before maturity when the interest is paid or

owner can deduct from gross income. Do

nominee, you must determine whether the CD

credited.

not reduce the amounts in boxes 1 and 2

has OID and any OID includible in the income of

If the owner of a short-term obligation at

by the forfeiture.

the owner. You must file an information return

maturity is not the original owner and can estab-

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showing the reportable interest and OID, if any,

lish the purchase price of the obligation, the

Box 4. Any backup withholding for this in-

on the CD. These rules apply whether or not you

amount subject to backup withholding must be

strument.

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

determined by treating the purchase price as the

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Box 5. The CUSIP number, if any. If there

the same way as OID on other debt instruments.

issue price. However, you can choose to disre-

is no CUSIP number, give a description of

See Short-Term Obligations Redeemed at Ma-

gard that price if it would require significant man-

the instrument, including the abbreviation

turity and Long-Term Debt Instruments, earlier.

ua l i n t e r v e n t i o n i n t h e co m p u t e r o r

for the stock exchange, the abbreviation

recordkeeping system used for the obligation. If

used by the stock exchange for the issuer,

Bearer Bonds and Coupons

the purchase price of a listed obligation is not

the coupon rate, and the year of maturity

established or is disregarded, you must use the

(for example, NYSE XYZ 12.50 2003). If

If a coupon from a bearer bond is presented to

issue price shown in Section III.

the issuer of the instrument is other than

you for collection before the bond matures, you

Long-term obligations. If no cash payments

the payer, show the name of the issuer in

generally must report the interest on Form

are made on a long-term obligation before ma-

this box.

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

turity, backup withholding applies only at matur-

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either of the following apply.

Box 6. The OID on a U.S. Treasury obliga-

ity. The amount subject to backup withholding is

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tion for the part of the year the owner held

You hold the bond as a nominee for the

the OID includible in the owner’s gross income

the instrument.

true owner.

for the calendar year when the obligation ma-

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Publication 1212 - List Of Original Issue Discount Instruments - Department Of Treasury - 2002 Page 4

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