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2011 1040 Ez Tax Forms

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2011 1040 Ez Tax Forms

2011 1040 ez tax forms 19. 2011 1040 ez tax forms   Education- Related Adjustments Table of Contents Introduction Useful Items - You may want to see: Student Loan Interest DeductionStudent Loan Interest Defined Can You Claim the Deduction How Much Can You Deduct How Do You Figure the Deduction Tuition and Fees DeductionCan You Claim the Deduction What Expenses Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses How Much Can You Deduct Educator Expenses Introduction This chapter discusses the education-related adjustment you can deduct in figuring your adjusted gross income. 2011 1040 ez tax forms This chapter covers the student loan interest deduction, tuition and fees deduction, and the deduction for educator expenses. 2011 1040 ez tax forms Useful Items - You may want to see: Publication 970 Tax Benefits for Education Student Loan Interest Deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. 2011 1040 ez tax forms However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. 2011 1040 ez tax forms For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. 2011 1040 ez tax forms This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. 2011 1040 ez tax forms Table 19-1 summarizes the features of the student loan interest deduction. 2011 1040 ez tax forms Table 19-1. 2011 1040 ez tax forms Student Loan Interest Deduction at a Glance Do not rely on this table alone. 2011 1040 ez tax forms Refer to the text for more details. 2011 1040 ez tax forms Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. 2011 1040 ez tax forms Loan qualifications Your student loan: •  must have been taken out solely to pay qualified education expenses, and   • cannot be from a related person or made under a qualified employer plan. 2011 1040 ez tax forms Student qualifications The student must be: • you, your spouse, or your dependent, and   • enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. 2011 1040 ez tax forms Time limit on deduction You can deduct interest paid during the remaining period of your student loan. 2011 1040 ez tax forms Phaseout The amount of your deduction depends on your income level. 2011 1040 ez tax forms Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. 2011 1040 ez tax forms It includes both required and voluntary interest payments. 2011 1040 ez tax forms Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent (defined in chapter 3) when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period when the student is an eligible student. 2011 1040 ez tax forms Loans from the following sources are not qualified student loans. 2011 1040 ez tax forms A related person. 2011 1040 ez tax forms A qualified employer plan. 2011 1040 ez tax forms Exceptions. 2011 1040 ez tax forms   For purposes of the student loan interest deduction, the following are exceptions to the general rules for dependents. 2011 1040 ez tax forms An individual can be your dependent even if you are the dependent of another taxpayer. 2011 1040 ez tax forms An individual can be your dependent even if the individual files a joint return with a spouse. 2011 1040 ez tax forms An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). 2011 1040 ez tax forms    Reasonable period of time. 2011 1040 ez tax forms   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. 2011 1040 ez tax forms   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. 2011 1040 ez tax forms The expenses relate to a specific academic period. 2011 1040 ez tax forms The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. 2011 1040 ez tax forms   If neither of the above situations applies, the reasonable period of time is determined based on all the relevant facts and circumstances. 2011 1040 ez tax forms Academic period. 2011 1040 ez tax forms   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. 2011 1040 ez tax forms In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. 2011 1040 ez tax forms Eligible student. 2011 1040 ez tax forms   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. 2011 1040 ez tax forms Enrolled at least half-time. 2011 1040 ez tax forms   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. 2011 1040 ez tax forms   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 2011 1040 ez tax forms However, the standard may not be lower than any of those established by the U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Department of Education under the Higher Education Act of 1965. 2011 1040 ez tax forms Related person. 2011 1040 ez tax forms   You cannot deduct interest on a loan you get from a related person. 2011 1040 ez tax forms Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. 2011 1040 ez tax forms ), Your lineal descendants (children, grandchildren, etc. 2011 1040 ez tax forms ), and Certain corporations, partnerships, trusts, and exempt organizations. 2011 1040 ez tax forms Qualified employer plan. 2011 1040 ez tax forms   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. 2011 1040 ez tax forms Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. 2011 1040 ez tax forms They include amounts paid for the following items. 2011 1040 ez tax forms Tuition and fees. 2011 1040 ez tax forms Room and board. 2011 1040 ez tax forms Books, supplies, and equipment. 2011 1040 ez tax forms Other necessary expenses (such as transportation). 2011 1040 ez tax forms The cost of room and board qualifies only to the extent that it is not more than: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or If greater, the actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 2011 1040 ez tax forms Eligible educational institution. 2011 1040 ez tax forms   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Department of Education. 2011 1040 ez tax forms It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2011 1040 ez tax forms   Certain educational institutions located outside the United States also participate in the U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Department of Education's Federal Student Aid (FSA) programs. 2011 1040 ez tax forms   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. 2011 1040 ez tax forms   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. 2011 1040 ez tax forms The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. 2011 1040 ez tax forms    The educational institution should be able to tell you if it is an eligible educational institution. 2011 1040 ez tax forms Adjustments to qualified education expenses. 2011 1040 ez tax forms   You must reduce your qualified education expenses by certain tax-free items (such as the tax-free part of scholarships and fellowships). 2011 1040 ez tax forms See chapter 4 of Publication 970 for details. 2011 1040 ez tax forms Include as Interest In addition to simple interest on the loan, certain loan origination fees, capitalized interest, interest on revolving lines of credit, and interest on refinanced student loans can be student loan interest if all other requirements are met. 2011 1040 ez tax forms Loan origination fee. 2011 1040 ez tax forms   In general, this is a one-time fee charged by the lender when a loan is made. 2011 1040 ez tax forms To be deductible as interest, the fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. 2011 1040 ez tax forms A loan origination fee treated as interest accrues over the life of the loan. 2011 1040 ez tax forms Capitalized interest. 2011 1040 ez tax forms    This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. 2011 1040 ez tax forms Interest on revolving lines of credit. 2011 1040 ez tax forms   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. 2011 1040 ez tax forms See Qualified Education Expenses , earlier. 2011 1040 ez tax forms Interest on refinanced student loans. 2011 1040 ez tax forms   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. 2011 1040 ez tax forms If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. 2011 1040 ez tax forms Voluntary interest payments. 2011 1040 ez tax forms   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. 2011 1040 ez tax forms Do Not Include as Interest You cannot claim a student loan interest deduction for any of the following items. 2011 1040 ez tax forms Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. 2011 1040 ez tax forms Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. 2011 1040 ez tax forms Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. 2011 1040 ez tax forms For more information, see Student Loan Repayment Assistance in chapter 5 of Publication 970. 2011 1040 ez tax forms Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. 2011 1040 ez tax forms Your filing status is any filing status except married filing separately. 2011 1040 ez tax forms No one else is claiming an exemption for you on his or her tax return. 2011 1040 ez tax forms You are legally obligated to pay interest on a qualified student loan. 2011 1040 ez tax forms You paid interest on a qualified student loan. 2011 1040 ez tax forms Interest paid by others. 2011 1040 ez tax forms   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. 2011 1040 ez tax forms See chapter 4 of Publication 970 for more information. 2011 1040 ez tax forms No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, home mortgage interest). 2011 1040 ez tax forms How Much Can You Deduct Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. 2011 1040 ez tax forms However, the amount determined above is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). 2011 1040 ez tax forms You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). 2011 1040 ez tax forms For details on figuring your MAGI, see chapter 4 of Publication 970. 2011 1040 ez tax forms How Do You Figure the Deduction Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the Form 1040 or Form 1040A instructions. 2011 1040 ez tax forms However, if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1 in chapter 4 of Publication 970. 2011 1040 ez tax forms To help you figure your student loan interest deduction, you should receive Form 1098-E, Student Loan Interest Statement. 2011 1040 ez tax forms Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. 2011 1040 ez tax forms For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. 2011 1040 ez tax forms Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. 2011 1040 ez tax forms However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. 2011 1040 ez tax forms For information on allocating payments between interest and principal, see chapter 4 of Publication 970. 2011 1040 ez tax forms To claim the deduction, enter the allowable amount on Form 1040, line 33, or Form 1040A, line 18. 2011 1040 ez tax forms Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). 2011 1040 ez tax forms You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. 2011 1040 ez tax forms The qualified expenses must be for higher education, as explained later under What Expenses Qualify . 2011 1040 ez tax forms The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. 2011 1040 ez tax forms Table 19-2 summarizes the features of the tuition and fees deduction. 2011 1040 ez tax forms You may be able to take a credit for your education expenses instead of a deduction. 2011 1040 ez tax forms You can choose the one that will give you the lower tax. 2011 1040 ez tax forms See chapter 35, Education Credits, for details about the credits. 2011 1040 ez tax forms Can You Claim the Deduction The following rules will help you determine if you can claim the tuition and fees deduction. 2011 1040 ez tax forms Who Can Claim the Deduction Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. 2011 1040 ez tax forms You paid qualified education expenses of higher education in 2013 for academic periods beginning in 2013 and those beginning in the first three months of 2014. 2011 1040 ez tax forms You paid the education expenses for an eligible student. 2011 1040 ez tax forms The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption (defined in chapter 3) on your tax return. 2011 1040 ez tax forms Qualified education expenses are defined under What Expenses Qualify . 2011 1040 ez tax forms Eligible students are defined later under Who Is an Eligible Student . 2011 1040 ez tax forms Who Cannot Claim the Deduction You cannot claim the tuition and fees deduction if any of the following apply. 2011 1040 ez tax forms Your filing status is married filing separately. 2011 1040 ez tax forms Another person can claim an exemption for you as a dependent on his or her tax return. 2011 1040 ez tax forms You cannot take the deduction even if the other person does not actually claim that exemption. 2011 1040 ez tax forms Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). 2011 1040 ez tax forms You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. 2011 1040 ez tax forms More information on nonresident aliens can be found in Publication 519, U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Tax Guide for Aliens. 2011 1040 ez tax forms You or anyone else claims an American opportunity or lifetime learning credit in 2013 with respect to expenses of the student for whom the qualified education expenses were paid. 2011 1040 ez tax forms However, a state tax credit will not disqualify you from claiming a tuition and fees deduction. 2011 1040 ez tax forms Table 19-2. 2011 1040 ez tax forms Tuition and Fees Deduction at a Glance Do not rely on this table alone. 2011 1040 ez tax forms Refer to the text for more details. 2011 1040 ez tax forms Question   Answer What is the maximum benefit?   You can reduce your income subject to tax by up to $4,000. 2011 1040 ez tax forms Where is the deduction taken?   As an adjustment to income on Form 1040, line 34, or Form 1040A, line 19. 2011 1040 ez tax forms For whom must the expenses be paid?   A student enrolled in an eligible educational institution who is either: you, your spouse, or your dependent for whom you claim an exemption. 2011 1040 ez tax forms What tuition and fees are deductible?   Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. 2011 1040 ez tax forms What Expenses Qualify The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 2011 1040 ez tax forms Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period (defined earlier under Student Loan Interest Deduction ) beginning in 2013 or in the first 3 months of 2014. 2011 1040 ez tax forms Payments with borrowed funds. 2011 1040 ez tax forms   You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. 2011 1040 ez tax forms Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. 2011 1040 ez tax forms Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. 2011 1040 ez tax forms Student withdraws from class(es). 2011 1040 ez tax forms   You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws. 2011 1040 ez tax forms Qualified Education Expenses For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. 2011 1040 ez tax forms Eligible educational institution. 2011 1040 ez tax forms   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Department of Education. 2011 1040 ez tax forms It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2011 1040 ez tax forms The educational institution should be able to tell you if it is an eligible educational institution. 2011 1040 ez tax forms   Certain educational institutions located outside the United States also participate in the U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Department of Education's Federal Student Aid (FSA) programs. 2011 1040 ez tax forms Academic period. 2011 1040 ez tax forms    An academic period is any quarter, semester, trimester, or any other period of study as reasonably determined by an eligible educational institution. 2011 1040 ez tax forms If an eligible educational institution uses credit hours and does not have academic terms, each payment period may be treated as an academic period. 2011 1040 ez tax forms Related expenses. 2011 1040 ez tax forms   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses for the tuition and fees deduction only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. 2011 1040 ez tax forms Prepaid expenses. 2011 1040 ez tax forms   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring the tuition and fees deduction. 2011 1040 ez tax forms See Academic period, earlier. 2011 1040 ez tax forms For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring the tuition and fees deduction for 2013 only if you meet all the other requirements. 2011 1040 ez tax forms    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 tuition and fees deduction. 2011 1040 ez tax forms No Double Benefit Allowed You cannot do any of the following. 2011 1040 ez tax forms Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense. 2011 1040 ez tax forms Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year. 2011 1040 ez tax forms Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). 2011 1040 ez tax forms For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. 2011 1040 ez tax forms See Figuring the Taxable Portion of a Distribution in chapter 7 (Coverdell ESA) and chapter 8 (QTP) of Publication 970. 2011 1040 ez tax forms Deduct qualified education expenses that have been paid with tax-free interest on U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms savings bonds (Form 8815). 2011 1040 ez tax forms See Figuring the Tax-Free Amount in chapter 10 of Publication 970. 2011 1040 ez tax forms Deduct qualified education expenses that have been paid with tax-free educational assistance such as a scholarship, grant, or employer-provided educational assistance. 2011 1040 ez tax forms See Adjustments to qualified education expenses, later. 2011 1040 ez tax forms Adjustments to qualified education expenses. 2011 1040 ez tax forms   For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. 2011 1040 ez tax forms The result is the amount of adjusted qualified education expenses for each student. 2011 1040 ez tax forms Tax-free educational assistance. 2011 1040 ez tax forms   For tax-free educational assistance you received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance to that academic period. 2011 1040 ez tax forms See Academic period, earlier. 2011 1040 ez tax forms   This includes: The tax-free part of scholarships and fellowships, including Pell grants (see chapter 1 of Publication 970), The tax-free part of any employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2011 1040 ez tax forms Generally, any scholarship or fellowship you receive is treated as tax-free educational assistance. 2011 1040 ez tax forms However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent you include it in gross income (if you are required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 2011 1040 ez tax forms 970, chapter 1. 2011 1040 ez tax forms The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 2011 1040 ez tax forms 970, chapter 1. 2011 1040 ez tax forms You may be able to increase the combined value of your tuition and fees deduction and certain educational assistance if you include some or all of the educational assistance in income in the year it is received. 2011 1040 ez tax forms For details, see Adjustments to Qualified Education Expenses in chapter 6 of Pub. 2011 1040 ez tax forms 970. 2011 1040 ez tax forms Some tax-free educational assistance received in 2013 may be treated as a refund of qualified education expenses paid in 2013. 2011 1040 ez tax forms This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). 2011 1040 ez tax forms If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. 2011 1040 ez tax forms If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. 2011 1040 ez tax forms Refunds. 2011 1040 ez tax forms   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or may require you to include some or all of the refund in your gross income for the year the refund is received. 2011 1040 ez tax forms See chapter 6 of Pub. 2011 1040 ez tax forms 970 for more information. 2011 1040 ez tax forms Some tax-free educational assistance received after 2013 may be treated as a refund. 2011 1040 ez tax forms See Tax-free educational assistance, earlier. 2011 1040 ez tax forms Refunds received in 2013. 2011 1040 ez tax forms    For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. 2011 1040 ez tax forms Refunds received after 2013 but before your income tax return is filed. 2011 1040 ez tax forms   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. 2011 1040 ez tax forms Refunds received after 2013 and after your income tax return is filed. 2011 1040 ez tax forms   If you receive a refund after 2013 of qualified education expenses you paid in 2013 and the refund is received after you file your 2013 income tax return, you may need to include some or all of the refund in your gross income for the year the refund is received. 2011 1040 ez tax forms See chapter 6 of Pub. 2011 1040 ez tax forms 970 for more information. 2011 1040 ez tax forms Coordination with Coverdell education savings accounts and qualified tuition programs. 2011 1040 ez tax forms    Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). 2011 1040 ez tax forms For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. 2011 1040 ez tax forms Amounts that do not reduce qualified education expenses. 2011 1040 ez tax forms   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 2011 1040 ez tax forms   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. 2011 1040 ez tax forms The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses. 2011 1040 ez tax forms The use of the money is not restricted. 2011 1040 ez tax forms Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. 2011 1040 ez tax forms This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. 2011 1040 ez tax forms Sports, games, hobbies, and noncredit courses. 2011 1040 ez tax forms   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. 2011 1040 ez tax forms However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. 2011 1040 ez tax forms Comprehensive or bundled fees. 2011 1040 ez tax forms   Some eligible educational institutions combine all of their fees for an academic period into one amount. 2011 1040 ez tax forms If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. 2011 1040 ez tax forms The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. 2011 1040 ez tax forms See How Do You Figure the Deduction , later, for more information about Form 1098-T. 2011 1040 ez tax forms Who Is an Eligible Student For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (defined earlier). 2011 1040 ez tax forms Who Can Claim a Dependent's Expenses Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must: Have paid the expenses, and Claim an exemption for the student as a dependent. 2011 1040 ez tax forms Table 19-3 summarizes who can claim the deduction. 2011 1040 ez tax forms How Much Can You Deduct The maximum tuition and fees deduction in 2013 is $4,000, $2,000, or $0, depending on the amount of your MAGI. 2011 1040 ez tax forms For details on figuring your MAGI, see chapter 6 of Publication 970. 2011 1040 ez tax forms How Do You Figure the Deduction Figure the deduction using Form 8917. 2011 1040 ez tax forms To help you figure your tuition and fees deduction, you should receive Form 1098-T, Tuition Statement. 2011 1040 ez tax forms Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. 2011 1040 ez tax forms To claim the deduction, enter the allowable amount on Form 1040, line 34, or Form 1040A, line 19, and attach your completed Form 8917. 2011 1040 ez tax forms Table 19-3. 2011 1040 ez tax forms Who Can Claim a Dependent's Expenses Do not rely on this table alone. 2011 1040 ez tax forms See Who Can Claim a Dependent's Expenses in chapter 6 of Publication 970. 2011 1040 ez tax forms IF your dependent is an eligible student and you. 2011 1040 ez tax forms . 2011 1040 ez tax forms . 2011 1040 ez tax forms AND. 2011 1040 ez tax forms . 2011 1040 ez tax forms . 2011 1040 ez tax forms THEN. 2011 1040 ez tax forms . 2011 1040 ez tax forms . 2011 1040 ez tax forms claim an exemption for your dependent you paid all qualified education expenses for your dependent only you can deduct the qualified education expenses that you paid. 2011 1040 ez tax forms Your dependent cannot take a deduction. 2011 1040 ez tax forms claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. 2011 1040 ez tax forms do not claim an exemption for your dependent you paid all qualified education expenses no one is allowed to take a deduction. 2011 1040 ez tax forms do not claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. 2011 1040 ez tax forms Educator Expenses If you were an eligible educator in 2013, you can deduct on Form 1040, line 23, or Form 1040A, line 16, up to $250 of qualified expenses you paid in 2013. 2011 1040 ez tax forms If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. 2011 1040 ez tax forms However, neither spouse can deduct more than $250 of his or her qualified expenses on Form 1040, line 23, or Form 1040A, line 16. 2011 1040 ez tax forms You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A (Form 1040), line 21. 2011 1040 ez tax forms Eligible educator. 2011 1040 ez tax forms   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. 2011 1040 ez tax forms Qualified expenses. 2011 1040 ez tax forms   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. 2011 1040 ez tax forms An ordinary expense is one that is common and accepted in your educational field. 2011 1040 ez tax forms A necessary expense is one that is helpful and appropriate for your profession as an educator. 2011 1040 ez tax forms An expense does not have to be required to be considered necessary. 2011 1040 ez tax forms   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. 2011 1040 ez tax forms   You must reduce your qualified expenses by the following amounts. 2011 1040 ez tax forms Excludable U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms series EE and I savings bond interest from Form 8815. 2011 1040 ez tax forms See Figuring the Tax-Free Amount in chapter 10 of Publication 970. 2011 1040 ez tax forms Nontaxable qualified tuition program earnings or distributions. 2011 1040 ez tax forms See Figuring the Taxable Portion of a Distribution in chapter 8 of Publication 970. 2011 1040 ez tax forms Nontaxable distribution of earnings from a Coverdell education savings account. 2011 1040 ez tax forms See Figuring the Taxable Portion of a Distribution in chapter 7 of Publication 970. 2011 1040 ez tax forms Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2. 2011 1040 ez tax forms Prev  Up  Next   Home   More Online Publications
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The 2011 1040 Ez Tax Forms

2011 1040 ez tax forms Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. 2011 1040 ez tax forms Adjustment for premium. 2011 1040 ez tax forms Adjustment for acquisition premium. 2011 1040 ez tax forms Adjustment for market discount. 2011 1040 ez tax forms Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. 2011 1040 ez tax forms “Original issue discount” is defined first. 2011 1040 ez tax forms The other terms are listed alphabetically. 2011 1040 ez tax forms Original issue discount (OID). 2011 1040 ez tax forms   OID is a form of interest. 2011 1040 ez tax forms It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). 2011 1040 ez tax forms Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. 2011 1040 ez tax forms Accrual period. 2011 1040 ez tax forms   An accrual period is an interval of time used to measure OID. 2011 1040 ez tax forms The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. 2011 1040 ez tax forms Acquisition premium. 2011 1040 ez tax forms   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. 2011 1040 ez tax forms A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. 2011 1040 ez tax forms See Premium, later. 2011 1040 ez tax forms Adjusted issue price. 2011 1040 ez tax forms   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. 2011 1040 ez tax forms In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. 2011 1040 ez tax forms The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. 2011 1040 ez tax forms Debt instrument. 2011 1040 ez tax forms   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). 2011 1040 ez tax forms It generally does not include an annuity contract. 2011 1040 ez tax forms Issue price. 2011 1040 ez tax forms   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. 2011 1040 ez tax forms Market discount. 2011 1040 ez tax forms   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. 2011 1040 ez tax forms An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. 2011 1040 ez tax forms The market discount is the difference between the issue price plus accrued OID and your adjusted basis. 2011 1040 ez tax forms Premium. 2011 1040 ez tax forms   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 purchase date, other than qualified stated interest. 2011 1040 ez tax forms The premium is the excess of the adjusted basis over the payable amounts. 2011 1040 ez tax forms See Publication 550 for information on the tax treatment of bond premium. 2011 1040 ez tax forms Qualified stated interest. 2011 1040 ez tax forms   In general, qualified stated interest is stated interest that is unconditionally 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. 2011 1040 ez tax forms Stated redemption price at maturity. 2011 1040 ez tax forms   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 qualified stated interest. 2011 1040 ez tax forms Yield to maturity (YTM). 2011 1040 ez tax forms   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 issue price of the debt instrument. 2011 1040 ez tax forms The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. 2011 1040 ez tax forms If you do not have this information, consult your broker, tax advisor, or the issuer. 2011 1040 ez tax forms Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. 2011 1040 ez tax forms If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. 2011 1040 ez tax forms The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms The following discussions explain what information is contained in each section of the list. 2011 1040 ez tax forms Section I. 2011 1040 ez tax forms   This section contains publicly offered, long-term debt instruments. 2011 1040 ez tax forms Section I-A: Corporate Debt Instruments Issued Before 1985. 2011 1040 ez tax forms Section I-B: Corporate Debt Instruments Issued After 1984. 2011 1040 ez tax forms Section I-C: Inflation-Indexed Debt Instruments. 2011 1040 ez tax forms For each publicly offered debt instrument in Section I, the list contains the following information. 2011 1040 ez tax forms The name of the issuer. 2011 1040 ez tax forms The Committee on Uniform Security Identification Procedures (CUSIP) number. 2011 1040 ez tax forms The issue date. 2011 1040 ez tax forms The maturity date. 2011 1040 ez tax forms The issue price expressed as a percent of principal or of stated redemption price at maturity. 2011 1040 ez tax forms The annual stated or coupon interest rate. 2011 1040 ez tax forms (This rate is shown as 0. 2011 1040 ez tax forms 00 if no annual interest payments are provided. 2011 1040 ez tax forms ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. 2011 1040 ez tax forms The total OID accrued up to January 1 of a calendar year. 2011 1040 ez tax forms (This information is not available for every instrument. 2011 1040 ez tax forms ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. 2011 1040 ez tax forms The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. 2011 1040 ez tax forms Section II. 2011 1040 ez tax forms   This section contains stripped coupons and principal components of U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Treasury and Government-Sponsored Enterprise debt instruments. 2011 1040 ez tax forms These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. 2011 1040 ez tax forms This section also includes debt instruments backed by U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Treasury securities that represent ownership interests in those securities. 2011 1040 ez tax forms   The obligations listed in Section II are arranged by maturity date. 2011 1040 ez tax forms The amounts listed are the total OID for a calendar year per $1,000 of redemption price. 2011 1040 ez tax forms Section III. 2011 1040 ez tax forms   This section contains short-term discount obligations. 2011 1040 ez tax forms Section III-A: Short-Term U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Treasury Bills. 2011 1040 ez tax forms Section III-B: Federal Home Loan Banks. 2011 1040 ez tax forms Section III-C: Federal National Mortgage Association. 2011 1040 ez tax forms Section III-D: Federal Farm Credit Banks. 2011 1040 ez tax forms Section III-E: Federal Home Loan Mortgage Corporation. 2011 1040 ez tax forms Section III-F: Federal Agricultural Mortgage Corporation. 2011 1040 ez tax forms    Information that supplements Section III-A is available on the Internet at http://www. 2011 1040 ez tax forms treasurydirect. 2011 1040 ez tax forms gov/tdhome. 2011 1040 ez tax forms htm. 2011 1040 ez tax forms   The short-term obligations listed in this section are arranged by maturity date. 2011 1040 ez tax forms For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. 2011 1040 ez tax forms U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms savings bonds. 2011 1040 ez tax forms Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. 2011 1040 ez tax forms Obligations issued by tax-exempt organizations. 2011 1040 ez tax forms OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. 2011 1040 ez tax forms Mortgage-backed securities and mortgage participation certificates. 2011 1040 ez tax forms Long-term OID debt instruments issued before May 28, 1969. 2011 1040 ez tax forms Short-term obligations, other than the obligations listed in Section III. 2011 1040 ez tax forms Debt instruments issued at a discount by states or their political subdivisions. 2011 1040 ez tax forms REMIC regular interests and CDOs. 2011 1040 ez tax forms Commercial paper and banker's acceptances issued at a discount. 2011 1040 ez tax forms Obligations issued at a discount by individuals. 2011 1040 ez tax forms Foreign obligations not traded in the United States and obligations not issued in the United States. 2011 1040 ez tax forms Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. 2011 1040 ez tax forms In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. 2011 1040 ez tax forms You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. 2011 1040 ez tax forms See Backup Withholding, later. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms 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). 2011 1040 ez tax forms Electronic payee statements. 2011 1040 ez tax forms   You can issue Form 1099-OID electronically with the consent of the recipient. 2011 1040 ez tax forms More information. 2011 1040 ez tax forms   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. 2011 1040 ez tax forms If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. 2011 1040 ez tax forms Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. 2011 1040 ez tax forms If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. 2011 1040 ez tax forms A special rule is used to determine the original issue price for information reporting on U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Treasury bills (T-bills) listed in Section III-A. 2011 1040 ez tax forms Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. 2011 1040 ez tax forms This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms Example 1. 2011 1040 ez tax forms There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. 2011 1040 ez tax forms The price actually paid by the owner cannot be established by owner or middleman records. 2011 1040 ez tax forms You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. 2011 1040 ez tax forms The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms For this purpose, you can rely on Section I of the OID list to determine the following information. 2011 1040 ez tax forms Whether a debt instrument has OID. 2011 1040 ez tax forms The OID to be reported on the Form 1099-OID. 2011 1040 ez tax forms In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. 2011 1040 ez tax forms You also can report OID on other long-term debt instruments. 2011 1040 ez tax forms Form 1099-OID. 2011 1040 ez tax forms   On Form 1099-OID for a calendar year show the following information. 2011 1040 ez tax forms Box 1. 2011 1040 ez tax forms The OID for the actual dates the owner held the debt instruments during a calendar year. 2011 1040 ez tax forms To determine this amount, see Figuring OID, next. 2011 1040 ez tax forms Box 2. 2011 1040 ez tax forms The qualified stated interest paid or credited during the calendar year. 2011 1040 ez tax forms Interest reported here is not reported on Form 1099-INT. 2011 1040 ez tax forms The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. 2011 1040 ez tax forms Box 3. 2011 1040 ez tax forms Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. 2011 1040 ez tax forms Do not reduce the amounts in boxes 1 and 2 by the forfeiture. 2011 1040 ez tax forms Box 4. 2011 1040 ez tax forms Any backup withholding for this debt instrument. 2011 1040 ez tax forms Box 7. 2011 1040 ez tax forms The CUSIP number, if any. 2011 1040 ez tax forms If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. 2011 1040 ez tax forms 50 2006). 2011 1040 ez tax forms If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. 2011 1040 ez tax forms Box 8. 2011 1040 ez tax forms The OID on a U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Treasury obligation for the part of the year the owner held the debt instrument. 2011 1040 ez tax forms Box 9. 2011 1040 ez tax forms Investment expenses passed on to holders of a single-class REMIC. 2011 1040 ez tax forms Boxes 10-12. 2011 1040 ez tax forms Use to report any state income tax withheld for this debt instrument. 2011 1040 ez tax forms Figuring OID. 2011 1040 ez tax forms   You can determine the OID on a long-term debt instrument by using either of the following. 2011 1040 ez tax forms Section I of the OID list. 2011 1040 ez tax forms The income tax regulations. 2011 1040 ez tax forms Using Section I. 2011 1040 ez tax forms   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. 2011 1040 ez tax forms Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. 2011 1040 ez tax forms For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. 2011 1040 ez tax forms   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. 2011 1040 ez tax forms Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. 2011 1040 ez tax forms Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. 2011 1040 ez tax forms Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. 2011 1040 ez tax forms Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. 2011 1040 ez tax forms If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. 2011 1040 ez tax forms Report the result on Form 1099-OID in box 1. 2011 1040 ez tax forms Using the income tax regulations. 2011 1040 ez tax forms   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms (If you use Section I-B, the OID is figured using 6-month accrual periods. 2011 1040 ez tax forms )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms You must file an information return showing the reportable interest and OID, if any, on the CD. 2011 1040 ez tax forms These rules apply whether or not you sold the CD to the owner. 2011 1040 ez tax forms Report OID on a CD in the same way as OID on other debt instruments. 2011 1040 ez tax forms See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms However, do not report the interest if either of the following apply. 2011 1040 ez tax forms You hold the bond as a nominee for the true owner. 2011 1040 ez tax forms The payee is a foreign person. 2011 1040 ez tax forms See Payments to foreign person under Backup Withholding, later. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms The coupon may have been “stripped” (separated) from the bond and separately purchased. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms 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%. 2011 1040 ez tax forms The backup withholding is deducted at the time a cash payment is made. 2011 1040 ez tax forms See Pub. 2011 1040 ez tax forms 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. 2011 1040 ez tax forms Backup withholding generally applies in the following situations. 2011 1040 ez tax forms The payee does not give you a taxpayer identification number (TIN). 2011 1040 ez tax forms The IRS notifies you that the payee gave an incorrect TIN. 2011 1040 ez tax forms The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. 2011 1040 ez tax forms For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. 2011 1040 ez tax forms However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. 2011 1040 ez tax forms Short-term obligations. 2011 1040 ez tax forms   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. 2011 1040 ez tax forms However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. 2011 1040 ez tax forms   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. 2011 1040 ez tax forms However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. 2011 1040 ez tax forms If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. 2011 1040 ez tax forms Long-term obligations. 2011 1040 ez tax forms   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. 2011 1040 ez tax forms The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. 2011 1040 ez tax forms The amount to be withheld is limited to the cash paid. 2011 1040 ez tax forms Registered long-term obligations with cash payments. 2011 1040 ez tax forms   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. 2011 1040 ez tax forms The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms For any payment, the required withholding is limited to the cash paid. 2011 1040 ez tax forms Payee not the original owner. 2011 1040 ez tax forms   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). 2011 1040 ez tax forms The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. 2011 1040 ez tax forms Bearer long-term obligations with cash payments. 2011 1040 ez tax forms   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. 2011 1040 ez tax forms For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. 2011 1040 ez tax forms For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. 2011 1040 ez tax forms The required withholding at maturity is limited to the cash paid. 2011 1040 ez tax forms Sales and redemptions. 2011 1040 ez tax forms   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. 2011 1040 ez tax forms Backup withholding applies in the following situations. 2011 1040 ez tax forms The payee does not give you a TIN. 2011 1040 ez tax forms The IRS notifies you that the payee gave an incorrect TIN. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms Payments outside the United States to U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms person. 2011 1040 ez tax forms   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms trade or business. 2011 1040 ez tax forms Payments to foreign person. 2011 1040 ez tax forms   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. 2011 1040 ez tax forms U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms -source amount. 2011 1040 ez tax forms   Backup withholding and information reporting are not required for payments of U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. 2011 1040 ez tax forms A U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms resident is not a foreign person. 2011 1040 ez tax forms For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. 2011 1040 ez tax forms Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms person. 2011 1040 ez tax forms   For information about the 28% withholding tax that may apply to payments of U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms -source OID or interest to foreign persons, see Publication 515. 2011 1040 ez tax forms Foreign-source amount. 2011 1040 ez tax forms   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms More information. 2011 1040 ez tax forms   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. 2011 1040 ez tax forms 6049-5. 2011 1040 ez tax forms Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. 2011 1040 ez tax forms It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. 2011 1040 ez tax forms It also includes a similar discussion 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. 2011 1040 ez tax forms However, the information provided does not cover every situation. 2011 1040 ez tax forms More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. 2011 1040 ez tax forms Including OID in income. 2011 1040 ez tax forms   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. 2011 1040 ez tax forms Exceptions. 2011 1040 ez tax forms   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. 2011 1040 ez tax forms U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms savings bonds. 2011 1040 ez tax forms Tax-exempt obligations. 2011 1040 ez tax forms (However, see Tax-Exempt Bonds and Coupons, later. 2011 1040 ez tax forms ) Obligations issued by individuals before March 2, 1984. 2011 1040 ez tax forms Loans of $10,000 or less between individuals who are not in the business of lending money. 2011 1040 ez tax forms (The dollar limit includes outstanding prior loans by the lender to the borrower. 2011 1040 ez tax forms ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. 2011 1040 ez tax forms   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. 2011 1040 ez tax forms Publication 550 also discusses rules for holders of REMIC interests and CDOs. 2011 1040 ez tax forms De minimis rule. 2011 1040 ez tax forms   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. 2011 1040 ez tax forms 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. 2011 1040 ez tax forms Debt instruments with de minimis OID are not listed in this publication. 2011 1040 ez tax forms There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. 2011 1040 ez tax forms Also, the de minimis rules generally do not apply to tax-exempt obligations. 2011 1040 ez tax forms Example 2. 2011 1040 ez tax forms You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. 2011 1040 ez tax forms One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. 2011 1040 ez tax forms Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. 2011 1040 ez tax forms Example 3. 2011 1040 ez tax forms Assume the same facts as Example 2, except the debt instrument was issued at $950. 2011 1040 ez tax forms You must report part of the $50 OID each year because it is more than $25. 2011 1040 ez tax forms Choice to report all interest as OID. 2011 1040 ez tax forms   Generally, 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. 2011 1040 ez tax forms See Constant yield method under Debt Instruments Issued After 1984, later, for more information. 2011 1040 ez tax forms   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. 2011 1040 ez tax forms For more information, see Regulations section 1. 2011 1040 ez tax forms 1272-3. 2011 1040 ez tax forms Purchase after date of original issue. 2011 1040 ez tax forms   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. 2011 1040 ez tax forms If so, the OID reported to you on Form 1099-OID may have to be adjusted. 2011 1040 ez tax forms For more information, see Showing an OID adjustment under How To Report OID, later. 2011 1040 ez tax forms The following rules generally do not apply to contingent payment debt instruments. 2011 1040 ez tax forms Adjustment for premium. 2011 1040 ez tax forms   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. 2011 1040 ez tax forms Your adjustment is the total OID shown on your Form 1099-OID. 2011 1040 ez tax forms Adjustment for acquisition premium. 2011 1040 ez tax forms   If your debt instrument has acquisition premium, reduce the OID you report. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms Adjustment for market discount. 2011 1040 ez tax forms   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. 2011 1040 ez tax forms Your adjustment is the accrued market discount for the year. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. 2011 1040 ez tax forms The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. 2011 1040 ez tax forms For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. 2011 1040 ez tax forms 1275-7. 2011 1040 ez tax forms Sale, exchange, or redemption. 2011 1040 ez tax forms   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. 2011 1040 ez tax forms If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. 2011 1040 ez tax forms Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). 2011 1040 ez tax forms   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. 2011 1040 ez tax forms Your basis, generally, is your cost increased by the OID you have included in income each year you held it. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. 2011 1040 ez tax forms Example 4. 2011 1040 ez tax forms Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. 2011 1040 ez tax forms 00 on November 1 of Year 1. 2011 1040 ez tax forms The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. 2011 1040 ez tax forms The debt instrument provides for semiannual payments of interest at 10%. 2011 1040 ez tax forms Assume the debt instrument is a capital asset in Larry's hands. 2011 1040 ez tax forms The debt instrument has $13,765. 2011 1040 ez tax forms 00 of OID ($100,000 stated redemption price at maturity minus $86,235. 2011 1040 ez tax forms 00 issue price). 2011 1040 ez tax forms Larry sold the debt instrument for $90,000 on November 1 of Year 4. 2011 1040 ez tax forms Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. 2011 1040 ez tax forms 00 of OID in income and has increased his basis by that amount to $90,791. 2011 1040 ez tax forms 00. 2011 1040 ez tax forms Larry has realized a loss of $791. 2011 1040 ez tax forms 00. 2011 1040 ez tax forms All of Larry's loss is capital loss. 2011 1040 ez tax forms Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument 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. 2011 1040 ez tax forms Form 1099-OID shows all OID income in box 1 except OID on a U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Treasury obligation, which is shown in box 8. 2011 1040 ez tax forms It also shows, in box 2, any qualified stated interest you must include in income. 2011 1040 ez tax forms (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. 2011 1040 ez tax forms ) A copy of Form 1099-OID will be sent to the IRS. 2011 1040 ez tax forms Do not attach your copy to your tax return. 2011 1040 ez tax forms Keep it for your records. 2011 1040 ez tax forms If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. 2011 1040 ez tax forms A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. 2011 1040 ez tax forms Form 1099-OID not received. 2011 1040 ez tax forms   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. 2011 1040 ez tax forms Refiguring OID. 2011 1040 ez tax forms   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. 2011 1040 ez tax forms You bought the debt instrument at a premium or at an acquisition premium. 2011 1040 ez tax forms The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Treasury securities). 2011 1040 ez tax forms The debt instrument is a contingent payment or inflation-indexed debt instrument. 2011 1040 ez tax forms See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. 2011 1040 ez tax forms Refiguring interest. 2011 1040 ez tax forms   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under 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. 2011 1040 ez tax forms Nominee. 2011 1040 ez tax forms   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 person, you are considered a “nominee. 2011 1040 ez tax forms ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. 2011 1040 ez tax forms Show the owner of the debt instrument as the “recipient” and you as the “payer. 2011 1040 ez tax forms ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. 2011 1040 ez tax forms You must also give a copy of the Form 1099-OID to the actual owner. 2011 1040 ez tax forms However, you are not required to file a nominee return to show amounts belonging to your spouse. 2011 1040 ez tax forms See the Form 1099 instructions for more information. 2011 1040 ez tax forms   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms Form 1040 or Form 1040A required. 2011 1040 ez tax forms   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. 2011 1040 ez tax forms You received a Form 1099-OID as a nominee for the actual owner. 2011 1040 ez tax forms Your total interest and OID income for the year was more than $1,500. 2011 1040 ez tax forms Form 1040 required. 2011 1040 ez tax forms   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. 2011 1040 ez tax forms For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. 2011 1040 ez tax forms Also, you must use Form 1040 if you were charged an early withdrawal penalty. 2011 1040 ez tax forms Where to report. 2011 1040 ez tax forms   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. 2011 1040 ez tax forms Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. 2011 1040 ez tax forms Also include any other OID and interest income for which you did not receive a Form 1099. 2011 1040 ez tax forms Showing an OID adjustment. 2011 1040 ez tax forms   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. 2011 1040 ez tax forms   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 instructions under 1. 2011 1040 ez tax forms If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. 2011 1040 ez tax forms Under your last entry on line 1, subtotal all interest and OID income listed on line 1. 2011 1040 ez tax forms Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. 2011 1040 ez tax forms Subtract that OID from the subtotal and enter the result on line 2. 2011 1040 ez tax forms If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. 2011 1040 ez tax forms Under your last entry on line 1, subtotal all interest and OID income listed on line 1. 2011 1040 ez tax forms Below the subtotal, write “OID Adjustment” and show the additional OID. 2011 1040 ez tax forms Add that OID to the subtotal and enter the result on line 2. 2011 1040 ez tax forms Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. 2011 1040 ez tax forms It also may depend on the type of the debt instrument. 2011 1040 ez tax forms There are different rules for each of the following debt instruments. 2011 1040 ez tax forms Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. 2011 1040 ez tax forms Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. 2011 1040 ez tax forms Debt instruments issued after July 1, 1982, and before 1985. 2011 1040 ez tax forms Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). 2011 1040 ez tax forms Contingent payment debt instruments issued after August 12, 1996. 2011 1040 ez tax forms Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. 2011 1040 ez tax forms Zero coupon bonds. 2011 1040 ez tax forms   The rules for figuring OID on zero coupon bonds backed by U. 2011 1040 ez tax forms S. 2011 1040 ez tax forms Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. 2011 1040 ez tax forms Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. 2011 1040 ez tax forms The OID, which is taxed as ordinary income, generally equals the following amount. 2011 1040 ez tax forms   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. 2011 1040 ez tax forms If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. 2011 1040 ez tax forms Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. 2011 1040 ez tax forms For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. 2011 1040 ez tax forms Your basis in the debt instrument is increased by the OID you include in income. 2011 1040 ez tax forms Form 1099-OID. 2011 1040 ez tax forms   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. 2011 1040 ez tax forms However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. 2011 1040 ez tax forms See Reduction for acquisition premium, later. 2011 1040 ez tax forms 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 www. 2011 1040 ez tax forms irs. 2011 1040 ez tax forms gov/pub1212 by clicking the link under Recent Developments. 2011 1040 ez tax forms Form 1099-OID not received. 2011 1040 ez tax forms    The OID listed is for each $1,000 of redemption price. 2011 1040 ez tax forms You must adjust the listed amount if your debt instrument has a different principal amount. 2011 1040 ez tax forms For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. 2011 1040 ez tax forms   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. 2011 1040 ez tax forms (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. 2011 1040 ez tax forms ) If you did not hold the debt instrument the entire year, figure your OID using the following method. 2011 1040 ez tax forms Divide the OID shown by 12. 2011 1040 ez tax forms Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. 2011 1040 ez tax forms This is the OID to include in income unless you paid an acquisition premium. 2011 1040 ez tax forms The reduction for acquisition premium is discussed next. 2011 1040 ez tax forms Reduction for acquisition premium. 2011 1040 ez tax forms   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. 2011 1040 ez tax forms Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. 2011 1040 ez tax forms This is the monthly OID. 2011 1040 ez tax forms Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. 2011 1040 ez tax forms (If the result is zero or less, stop here. 2011 1040 ez tax forms You did not pay an acquisition premium. 2011 1040 ez tax forms ) 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. 2011 1040 ez tax forms Subtract the amount figured in (3) from the amount figured in (1). 2011 1040 ez tax forms This is the OID to include in income for each month you hold the debt instrument during the year. 2011 1040 ez tax forms Transfers during the month. 2011 1040 ez tax forms   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, 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. 2011 1040 ez tax forms Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. 2011 1040 ez tax forms Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. 2011 1040 ez tax forms For information about showing the correct OID on your tax return, see How To Report OID, earlier. 2011 1040 ez tax forms Form 1099-OID. 2011 1040 ez tax forms   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. 2011 1040 ez tax forms However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. 2011 1040 ez tax forms See Constant yield method and the discussions on acquisition premium that follow, later. 2011 1040 ez tax forms 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 www. 2011 1040 ez tax forms irs. 2011 1040 ez tax forms gov/pub1212 by clicking the link under Recent Developments. 2011 1040 ez tax forms Form 1099-OID not received. 2011 1040 ez tax forms    The OID listed is for each $1,000 of redemption price. 2011 1040 ez tax forms You must adjust the listed amount if your debt instrument has a different principal amount. 2011 1040 ez tax forms For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. 2011 1040 ez tax forms   If you held the debt instrument the entire year, use the OID shown in Section I-A. 2011 1040 ez tax forms (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. 2011 1040 ez tax forms ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. 2011 1040 ez tax forms Method 1. 2011 1040 ez tax forms    Divide the total OID for a calendar year by 365 (366 for leap years). 2011 1040 ez tax forms Multiply the result in (1) by the number of days you held the debt instrument during that particular year. 2011 1040 ez tax forms  This computation is an approximation and may result in a slightly higher OID than Method 2. 2011 1040 ez tax forms Method 2. 2011 1040 ez tax forms    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. 2011 1040 ez tax forms (See Accrual period under Constant yield method, next. 2011 1040 ez tax forms ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. 2011 1040 ez tax forms If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. 2011 1040 ez tax forms Add the results of (2) and (3). 2011 1040 ez tax forms This is the OID to include in income, unless you paid an acquisition premium. 2011 1040 ez tax forms (The reduction for acquisition premium is discussed later. 2011 1040 ez tax forms ) Constant yield method. 2011 1040 ez tax forms   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. 2011 1040 ez tax forms OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. 2011 1040 ez tax forms   Figure the OID allocable to any accrual period as follows. 2011 1040 ez tax forms Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. 2011 1040 ez tax forms Subtract from the result in (1) any qualified stated interest allocable to the accrual period. 2011 1040 ez tax forms Accrual period. 2011 1040 ez tax forms   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. 2011 1040 ez tax forms Your tax year will usually include parts of two accrual periods. 2011 1040 ez tax forms Daily OID. 2011 1040 ez tax forms   The OID for any accrual period is allocated equally to each day in the accrual period. 2011 1040 ez tax forms You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. 2011 1040 ez tax forms If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. 2011 1040 ez tax forms Figuring daily OID. 2011 1040 ez tax forms   The daily OID for the initial accrual period is figured using the following formula. 2011 1040 ez tax forms   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. 2011 1040 ez tax forms Reduction for acquisition premium on debt instruments purchased before July 19, 1984. 2011 1040 ez tax forms   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. 2011 1040 ez tax forms Figure 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. 2011 1040 ez tax forms Reduction for acquisition premium on debt instruments purchased after July 18, 1984. 2011 1040 ez tax forms   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. 2011 1040 ez tax forms However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. 2011 1040 ez tax forms To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. 2011 1040 ez tax forms The numerator is the acquisition premium. 2011 1040 ez tax forms The denominator is the total OID remaining for the debt instrument after your purchase date. 2011 1040 ez tax forms Section I-A is available at www. 2011 1040 ez tax forms irs. 2011 1040 ez tax forms gov/pub1212 and clicking the link under Recent Developments. 2011 1040 ez tax forms Using Section I-A to figure accumulated OID. 2011 1040 ez tax forms   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. 2011 1040 ez tax forms The amount from the “Total OID to January 1, YYYY” column for your debt instrument. 2011 1040 ez tax forms The OID from January 1 of a calendar year to the date of purchase, figured as follows. 2011 1040 ez tax forms Multiply the daily OID for the first accrual 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. 2011 1040 ez tax forms Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. 2011 1040 ez tax forms Add the amounts figured in (2a) and (2b). 2011 1040 ez tax forms 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. 2011 1040 ez tax forms You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. 2011 1040 ez tax forms Your basis in the debt instrument is increased by the OID you include in income. 2011 1040 ez tax forms For information about showing the correct OID on your tax return, see How To Report OID, earlier. 2011 1040 ez tax forms Form 1099-OID. 2011 1040 ez tax forms   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. 2011 1040 ez tax forms However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. 2011 1040 ez tax forms See Constant yield method and Reduction for acquisition premium, later. 2011 1040 ez tax forms   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. 2011 1040 ez tax forms See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. 2011 1040 ez tax forms 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 www. 2011 1040 ez tax forms irs. 2011 1040 ez tax forms gov/pub1212 by clicking the link under Recent Developments. 2011 1040 ez tax forms Form 1099-OID not received. 2011 1040 ez tax forms   The OID listed is for each $1,000 of redemption price. 2011 1040 ez tax forms You must adjust the listed amount if your debt instrument has a different principal amount. 2011 1040 ez tax forms For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. 2011 1040 ez tax forms   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. 2011 1040 ez tax forms (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. 2011 1040 ez tax forms ) If you did not hold the debt instrument the entire year, figure your OID as follows. 2011 1040 ez tax forms Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. 2011 1040 ez tax forms (See Accrual period under Constant yield method, later. 2011 1040 ez tax forms ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. 2011 1040 ez tax forms Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. 2011 1040 ez tax forms Add the results of (2) and (3). 2011 1040 ez tax forms This is the OID to include in income for that year, unless you paid an acquisition premium. 2011 1040 ez tax forms (The reduction for acquisition premium is discussed later. 2011 1040 ez tax forms ) Tax-exempt bond. 2011 1040 ez tax forms   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. 2011 1040 ez tax forms You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. 2011 1040 ez tax forms In general, use the rules that follow to determine your OID. 2011 1040 ez tax forms Constant yield method. 2011 1040 ez tax forms   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. 2011 1040 ez tax forms (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. 2011 1040 ez tax forms ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. 2011 1040 ez tax forms   Figure the OID allocable to any accrual period as follows. 2011 1040 ez tax forms Multiply the adjusted issue price at the beginning of the accrual period by a fraction. 2011 1040 ez tax forms The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. 2011 1040 ez tax forms The yield must be stated appropriately taking into account the length of the particular accrual period. 2011 1040 ez tax forms Subtract from the result in (1) any qualified stated interest allocable to the accrual period. 2011 1040 ez tax forms Accrual period. 2011 1040 ez tax forms   For debt instruments issued 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 debt instrument or the date 6 months before that date. 2011 1040 ez tax forms For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. 2011 1040 ez tax forms Any short period is included as the first accrual period. 2011 1040 ez tax forms   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 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. 2011 1040 ez tax forms However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. 2011 1040 ez tax forms Daily OID. 2011 1040 ez tax forms   The OID for any accrual period is allocated equally to each day in the accrual period. 2011 1040 ez tax forms Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. 2011 1040 ez tax forms Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. 2011 1040 ez tax forms If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. 2011 1040 ez tax forms Figuring daily OID. 2011 1040 ez tax forms   The daily OID for the initial accrual period is figured using the following formula. 2011 1040 ez tax forms   (ip × ytm/n) − qsi     p   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 periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. 2011 1040 ez tax forms Example 5. 2011 1040 ez tax forms On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. 2011 1040 ez tax forms 17. 2011 1040 ez tax forms According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. 2011 1040 ez tax forms The yield to maturity is 12%, compounded semiannually. 2011 1040 ez tax forms The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. 2011 1040 ez tax forms The accrual periods are the 6-month periods ending on each of these dates. 2011 1040 ez tax forms The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). 2011 1040 ez tax forms The daily OID for the first accrual period is figured as follows. 2011 1040 ez tax forms   ($86,235. 2011 1040 ez tax forms 17 x . 2011 1040 ez tax forms 12/2) – $5,000     181 days     = $174. 2011 1040 ez tax forms 11020 = $. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms 17 + $174. 2011 1040 ez tax forms 11), or $86,409. 2011 1040 ez tax forms 28. 2011 1040 ez tax forms The number of days for the second accrual period (July 1 through December 31) is 184 days. 2011 1040 ez tax forms The daily OID for the second accrual period is figured as follows. 2011 1040 ez tax forms   ($86,409. 2011 1040 ez tax forms 28 x . 2011 1040 ez tax forms 12/2) – $5,000     184 days     = $184. 2011 1040 ez tax forms 55681 = $1. 2011 1040 ez tax forms 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, $174. 2011 1040 ez tax forms 11 ($. 2011 1040 ez tax forms 95665 × 182 days) plus $184. 2011 1040 ez tax forms 56 ($1. 2011 1040 ez tax forms 00303 × 184 days), or $358. 2011 1040 ez tax forms 67. 2011 1040 ez tax forms Add the OID to the $10,000 interest you report on your income tax return for Year 1. 2011 1040 ez tax forms Example 6. 2011 1040 ez tax forms Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. 2011 1040 ez tax forms Also, the interest payment dates are October 31 and April 30 of each calendar year. 2011 1040 ez tax forms The accrual periods are the 6-month periods ending on each of these dates. 2011 1040 ez tax forms The number of days for the first accrual period (May 1 through October 31) is 184 days. 2011 1040 ez tax forms The daily OID for the first accrual period is figured as follows. 2011 1040 ez tax forms   ($86,235. 2011 1040 ez tax forms 17 x . 2011 1040 ez tax forms 12/2) – $5,000     184 days     = $174. 2011 1040 ez tax forms 11020 = $. 2011 1040 ez tax forms 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). 2011 1040 ez tax forms The daily OID for the second accrual period is figured as follows. 2011 1040 ez tax forms   ($86,409. 2011 1040 ez tax forms 28 x . 2011 1040 ez tax forms 12/2) – $5,000     181 days     = $184. 2011 1040 ez tax forms 55681 = $1. 2011 1040 ez tax forms 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. 2011 1040 ez tax forms 31 of OID in income. 2011 1040 ez tax forms This is $174. 2011 1040 ez tax forms 11 ($. 2011 1040 ez tax forms 94625 × 184 days) for the period May 1 through October 31 plus $62. 2011 1040 ez tax forms 20 ($1. 2011 1040 ez tax forms 01965 × 61 days) for the period November 1 through December 31. 2011 1040 ez tax forms The OID is added to the $5,000 interest income paid on October 31 of Year 1. 2011 1040 ez tax forms Your basis in the debt instrument is increased by the OID you include in income. 2011 1040 ez tax forms On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. 2011 1040 ez tax forms 48 ($86,235. 2011 1040 ez tax forms 17 + $236. 2011 1040 ez tax forms 31). 2011 1040 ez tax forms Short first accrual period. 2011 1040 ez tax forms   You may have to make adjustments if a debt instrument has a short first accrual period. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms (The remaining accrual periods begin on May 1 and November 1. 2011 1040 ez tax forms ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. 2011 1040 ez tax forms You may use any reasonable compounding method in determining OID for a short period. 2011 1040 ez tax forms Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). 2011 1040 ez tax forms Consult your tax advisor for more information about making this computation. 2011 1040 ez tax forms   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. 2011 1040 ez tax forms Reduction for acquisition premium. 2011 1040 ez tax forms   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. 2011 1040 ez tax forms To figure the daily acquisition premium, multiply the daily OID by the following fraction. 2011 1040 ez tax forms The numerator is the acquisition premium. 2011 1040 ez tax forms The denominator is the total OID remaining for the debt instrument after your purchase date. 2011 1040 ez tax forms Example 7. 2011 1040 ez tax forms Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. 2011 1040 ez tax forms The adjusted issue price on November 1 of Year 1 is $86,409. 2011 1040 ez tax forms 28 ($86,235. 2011 1040 ez tax forms 17 + $174. 2011 1040 ez tax forms 11). 2011 1040 ez tax forms In this case, you paid an acquisition premium of $590. 2011 1040 ez tax forms 72 ($87,000 − $86,409. 2011 1040 ez tax forms 28). 2011 1040 ez tax forms The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. 2011 1040 ez tax forms 1) Daily OID on date of purchase (2nd accrual period) $1. 2011 1040 ez tax forms 01965*  2)  Acquisition premium $590. 2011 1040 ez tax forms 72    3)  Total OID remaining after purchase date ($13,764. 2011 1040 ez tax forms 83 − $174. 2011 1040 ez tax forms 11) 13,590. 2011 1040 ez tax forms 72   4) Line 2 ÷ line 3 . 2011 1040 ez tax forms 04346  5)  Line 1 × line 4 . 2011 1040 ez tax forms 04432  6)  Daily OID reduced for the acquisition premium. 2011 1040 ez tax forms Line 1 − line 5 $0. 2011 1040 ez tax forms 97533  * As shown in Example 6. 2011 1040 ez tax forms The total OID to include in income for Year 1 is $59. 2011 1040 ez tax forms 50 ($. 2011 1040 ez tax forms 97533 × 61 days). 2011 1040 ez tax forms Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. 2011 1040 ez tax forms In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. 2011 1040 ez tax forms If you hold a contingent payment bond, you must report OID as it accrues each year. 2011 1040 ez tax forms Because the actual payments on a contingent 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 payments on the debt instrument. 2011 1040 ez tax forms To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. 2011 1040 ez tax forms Noncontingent bond method. 2011 1040 ez tax forms    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. 2011 1040 ez tax forms In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. 2011 1040 ez tax forms When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. 2011 1040 ez tax forms If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. 2011 1040 ez tax forms If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. 2011 1040 ez tax forms Form 1099-OID. 2011 1040 ez tax forms   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. 2011 1040 ez tax forms For example, the amount may not be correct if the contingent payment was different from the projected amount. 2011 1040 ez tax forms If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. 2011 1040 ez tax forms For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. 2011 1040 ez tax forms Figuring OID. 2011 1040 ez tax forms   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. 2011 1040 ez tax forms The issuer must make these available to you. 2011 1040 ez tax forms Comparable yield. 2011 1040 ez tax forms   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. 2011 1040 ez tax forms The comparable yield is determined as of the debt instrument's issue date. 2011 1040 ez tax forms Projected payment schedule. 2011 1040 ez tax forms   The projected 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. 2011 1040 ez tax forms The projected payment schedule is created by the issuer as of the debt instrument's issue date. 2011 1040 ez tax forms It is used to determine the issuer's and holder's interest accruals and adjustments. 2011 1040 ez tax forms Steps for figuring OID. 2011 1040 ez tax forms   Figure the OID on a contingent payment debt instrument in two steps. 2011 1040 ez tax forms Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. 2011 1040 ez tax forms Use the comparable yield as the yield to maturity. 2011 1040 ez tax forms In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). 2011 1040 ez tax forms Do not treat any amount payable as qualified stated interest. 2011 1040 ez tax forms Adjust the OID in (1) to account for actual contingent payments. 2011 1040 ez tax forms If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. 2011 1040 ez tax forms If the contingent payment is less than the projected fixed amount, you have a negative adjustment. 2011 1040 ez tax forms Net positive adjustment. 2011 1040 ez tax forms   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. 2011 1040 ez tax forms Treat a net positive adjustment as additional OID for the tax year. 2011 1040 ez tax forms Net negative adjustment. 2011 1040 ez tax forms   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. 2011 1040 ez tax forms Use a net negative adjustment to offset OID on the debt instrument for the tax year. 2011 1040 ez tax forms If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. 2011 1040 ez tax forms However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. 2011 1040 ez tax forms You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. 2011 1040 ez tax forms Basis adjustments. 2011 1040 ez tax forms   In general, increase your basis in a contingent payment debt instrument by the OID included in income. 2011 1040 ez tax forms Your basis, however, is not affected by any negative or positive adjustments. 2011 1040 ez tax forms Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. 2011 1040 ez tax forms Treatment of gain or loss on sale or exchange. 2011 1040 ez tax forms   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. 2011 1040 ez tax forms 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. 2011 1040 ez tax forms If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. 2011 1040 ez tax forms See Regulations section 1. 2011 1040 ez tax forms 1275-4 for exceptions to these rules. 2011 1040 ez tax forms Premium, acquisition premium, and market discount. 2011 1040 ez tax forms   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. 2011 1040 ez tax forms See Regulations section 1. 2011 1040 ez tax forms 1275-4 to determine how to account for these items. 2011 1040 ez tax forms Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. 2011 1040 ez tax forms An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d