Publication 1212 - List Of Original Issue Discount Instruments - Department Of Treasury - 2002 Page 8
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16ip = issue price
calendar year 2002. (If your instrument is not
First
Second
listed in Section I – A, consult the issuer for infor-
Accrual
Accrual
ytm = yield to maturity
mation about the issue price, the yield to matur-
Year
Period
Period
Total
qsi = qualified stated interest
ity, and the OID that accrued for 2002.) If you did
1984 . . . . . $ .28096 ×
$ .32274 ×
not hold the debt instrument the entire year,
p = number of days in accrual period
121 days
245 days
$113.07
figure your OID using either of the following
1985 . . . . . $ .32274 ×
$ .36973 ×
methods.
The daily OID for subsequent accrual peri-
120 days
245 days
129.31
ods is figured the same way except the adjusted
Method 1.
1986 . . . . . $ .36973 ×
$ .42356 ×
issue price at the beginning of each period is
120 days
245 days
148.14
1) Divide the total OID for 2002 by 365.
used in the formula instead of the issue price.
1987 . . . . . $ .42356 ×
$ .48391 ×
120 days
245 days
169.39
2) Multiply the result in (1) by the number of
Example 9. On January 1, 1984, you
days you held the debt instrument in 2002.
1988 . . . . . $ .48391 ×
$ .55586 ×
bought a 20-year, 13% bond for $90,000 at
121 days
245 days
194.74
original issue. The redemption price of the bond
1989 . . . . . $ .55586 ×
$ .63679 ×
is $100,000. The qualified stated interest is
This computation is an approximation and may
$13,000 (13% × $100,000), which is uncondi-
120 days
245 days
222.71
result in a slightly higher OID than Method 2.
tionally payable each year. The bond has a yield
1990 . . . . . $ .63679 ×
$ .72951 ×
Method 2.
to maturity of 14.5587%. The daily OID for the
120 days
245 days
255.14
first accrual period is figured as follows.
1991 . . . . . $ .72951 ×
$ .83342 ×
1) Look up the daily OID for the first 2002
120 days
245 days
291.73
accrual period you held the instrument.
($90,000.00 x 14.5587%) – $13,000
1992 . . . . . $ .83342 ×
$ .95737 ×
(See Accrual period under Figuring OID
366 (leap year)
using the constant yield method, next.)
121 days
245 days
335.40
$102.83
=
= $.28096
1993 . . . . . $ .95737 ×
$1.09677 ×
366
2) Multiply the daily OID by the number of
120 days
245 days
383.59
days in 2002 you held the instrument dur-
You would have included in income $.28096
1994 . . . . . $1.09677 ×
$1.25644 ×
ing that accrual period.
for each day you held the bond during 1984. If
120 days
245 days
439.44
3) If you held the instrument for part of both
you held the bond for all of 1984, you would
1995 . . . . . $1.25644 ×
$1.43541 ×
have included OID of $102.83 ($.28096 × 366).
2002 accrual periods, repeat (1) and (2)
120 days
245 days
502.45
for the second accrual period.
The following table shows the adjusted issue
1996 . . . . . $1.43541 ×
$1.64890 ×
price, daily OID, and OID per accrual period
4) Add the results of (2) and (3). This is the
121 days
245 days
577.66
through 2002.
OID to include in income for 2002, unless
1997 . . . . . $1.64890 ×
$1.88896 ×
you paid an acquisition premium. (The re-
120 days
245 days
660.67
Accrual
Adjusted
OID for
duction for acquisition premium is dis-
1998 . . . . . $1.88896 ×
$2.16397 ×
Period
Year
Issue Price Daily OID Period
cussed later.)
120 days
245 days
756.85
1
1984
$90,000.00 $ .28096 $ 102.83
1999 . . . . . $2.16397 ×
$2.47224 ×
2
1985
90,102.83
.32274
117.80
Figuring OID using the constant yield
3
1986
90,220.63
.36973
134.95
120 days
245 days
865.38
method. This discussion shows how to figure
4
1987
90,355.58
.42356
154.60
2000 . . . . . $2.47224 ×
$2.83992 ×
5
1988
90,510.18
.48391
177.11
OID on debt instruments issued after July 1,
121 days
245 days
994.92
6
1989
90,687.29
.55586
202.89
1982, and before 1985, using a constant yield
7
1990
90,890.18
.63679
232.43
2001 . . . . . $2.83992 x
3.25337 x
method. OID is allocated over the life of the
8
1991
91,122.61
.72951
266.27
120 days
245 days
1,137.87
instrument through adjustments to the issue
9
1992
91,388.88
.83342
305.03
price for each accrual period.
10
1993
91,693.91
.95737
349.44
If you sold the bond on August 30, 2002, you
11
1994
92,043.35
1.09677
400.32
Figure the OID allocable to any accrual pe-
would figure the amount to include in your 2002
12
1995
92,443.67
1.25644
458.60
riod as follows.
income as follows.
13
1996
92,902.27
1.43541
525.36
14
1997
93,427.63
1.64890
601.85
1) Multiply the adjusted issue price at the be-
First accrual period: $3.25337 × 120
15
1998
94,029.48
1.88896
689.47
ginning of the accrual period by the
days (Jan 1 – Apr 30) . . . . . . . . . .
$390.40
16
1999
94,718.95
2.16397
789.85
Second accrual period: $3.72704 × 121
instrument’s yield to maturity.
17
2000
95,508.80
2.47224
904.84
days (May 1 – Aug 29) . . . . . . . . .
450.97
18
2001
96,413.64
2.83992 1,036.57
2) Subtract from the result in (1) any qualified
19
2002
97,450.21
3.25337 1,187.48
stated interest allocable to the accrual pe-
Total to include in 2002 income . . . .
$841.37
riod.
The daily OID for the 20th accrual period is
figured as follows.
However, if you held the bond the entire year
Accrual period. An accrual period for any
of 2002, the total OID to report is $1,303.52
OID instrument issued after July 1, 1982, and
($98,637.69 x 14.5587%) – $13,000
[$390.40 + $913.12 ($3.72704 × 245 days)].
before 1985 is each 1-year period beginning on
365
the date of the issue of the obligation and each
Reduction for acquisition premium on debt
$1360.37
=
= $3.72704
anniversary thereafter, or the shorter period to
instruments purchased before July 19, 1984.
365
maturity for the last accrual period. Your tax year
If you bought the debt instrument at an acquisi-
If you hold the bond for all of 2003, you would
will usually include parts of two accrual periods.
tion premium before July 19, 1984, figure the
include $1,360.37 in income ($3.72704 × 365).
OID includible in income by reducing the daily
Daily OID. The OID for any accrual period is
OID by the daily acquisition premium. Figure the
Example 10. Assume the same facts as in
allocated equally to each day in the accrual
daily acquisition premium by dividing the total
Example 9, except that you bought the bond at
period. You must include in income the sum of
acquisition premium by the number of days in
original issue on May 1, 1983. The daily OID for
the OID amounts for each day you hold the
the period beginning on your purchase date and
the first accrual period (May 1, 1983 – April 30,
instrument during the year. If your tax year in-
ending on the day before the date of maturity.
1984) was $.28096, as figured in Example 9. If
cludes parts of two or more accrual periods, you
you held the bond until the end of 1983, you
must include the proper daily OID amounts for
Example 11. Assume the same facts as in
would have included $68.84 in income for 1983
each accrual period.
Example 10, except that you bought the bond for
($.28096 × 245 days). If you continued to hold
$92,000 on May 1, 1984, after its original issue
Figuring daily OID. The daily OID for the
the bond, you would have included in income,
on May 1, 1983. In this case, you paid more for
initial accrual period is figured using the fol-
for 1984 through 2001, the following amounts of
the bond than its $90,102.83 adjusted issue
lowing formula.
OID.
price ($90,000 + $102.83). You paid $1,897.17
(ip × ytm) − qsi
($92,000 – $90,102.83) acquisition premium.
The daily OID for the accrual period May 1,
p
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