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2012 Income Tax Forms 1040ez

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2012 Income Tax Forms 1040ez

2012 income tax forms 1040ez 6. 2012 income tax forms 1040ez   Retail Tax on Heavy Trucks, Trailers, and Tractors Table of Contents Highway vehicle. 2012 income tax forms 1040ez Vehicles not considered highway vehicles. 2012 income tax forms 1040ez Idling reduction device. 2012 income tax forms 1040ez Separate purchase. 2012 income tax forms 1040ez Leases. 2012 income tax forms 1040ez Exported vehicle. 2012 income tax forms 1040ez Tax on resale of tax-paid trailers and semitrailers. 2012 income tax forms 1040ez Use treated as sale. 2012 income tax forms 1040ez Sale. 2012 income tax forms 1040ez Long-term lease. 2012 income tax forms 1040ez Short-term lease. 2012 income tax forms 1040ez Related person. 2012 income tax forms 1040ez Exclusions from tax base. 2012 income tax forms 1040ez Sales not at arm's length. 2012 income tax forms 1040ez Installment sales. 2012 income tax forms 1040ez Repairs and modifications. 2012 income tax forms 1040ez Further manufacture. 2012 income tax forms 1040ez Rail trailers and rail vans. 2012 income tax forms 1040ez Parts and accessories. 2012 income tax forms 1040ez Trash containers. 2012 income tax forms 1040ez House trailers. 2012 income tax forms 1040ez Camper coaches or bodies for self-propelled mobile homes. 2012 income tax forms 1040ez Farm feed, seed, and fertilizer equipment. 2012 income tax forms 1040ez Ambulances and hearses. 2012 income tax forms 1040ez Truck-tractors. 2012 income tax forms 1040ez Concrete mixers. 2012 income tax forms 1040ez Registration requirement. 2012 income tax forms 1040ez Further manufacture. 2012 income tax forms 1040ez A tax of 12% of the sales price is imposed on the first retail sale of the following articles, including related parts and accessories sold on or in connection with, or with the sale of, the articles. 2012 income tax forms 1040ez Truck chassis and bodies. 2012 income tax forms 1040ez Truck trailer and semitrailer chassis and bodies. 2012 income tax forms 1040ez Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. 2012 income tax forms 1040ez A truck is a highway vehicle primarily designed to transport its load on the same chassis as the engine, even if it is equipped to tow a vehicle, such as a trailer or semitrailer. 2012 income tax forms 1040ez A tractor is a highway vehicle designed to tow a vehicle, such as a trailer or semitrailer. 2012 income tax forms 1040ez A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing. 2012 income tax forms 1040ez A sale of a truck, truck trailer, or semitrailer is considered a sale of a chassis and a body. 2012 income tax forms 1040ez The seller is liable for the tax. 2012 income tax forms 1040ez Chassis or body. 2012 income tax forms 1040ez   A chassis or body is taxable only if you sell it for use as a component part of a highway vehicle that is a truck, truck trailer or semitrailer, or a tractor of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. 2012 income tax forms 1040ez Highway vehicle. 2012 income tax forms 1040ez   A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it is also designed to perform other functions. 2012 income tax forms 1040ez Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. 2012 income tax forms 1040ez A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation function for only one of the following. 2012 income tax forms 1040ez A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). 2012 income tax forms 1040ez A special kind of cargo, goods, supplies, or materials. 2012 income tax forms 1040ez Some off-highway task unrelated to highway transportation, except as discussed next. 2012 income tax forms 1040ez Vehicles not considered highway vehicles. 2012 income tax forms 1040ez   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the retail tax. 2012 income tax forms 1040ez Specially designed mobile machinery for nontransportation functions. 2012 income tax forms 1040ez A self-propelled vehicle is not a highway vehicle if all the following apply. 2012 income tax forms 1040ez The chassis has permanently mounted to it machinery or equipment used to perform certain operations (construction, manufacturing, drilling, mining, timbering, processing, farming, or similar operations) if the operation of the machinery or equipment is unrelated to transportation on or off the public highways. 2012 income tax forms 1040ez The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if applicable) for the machinery or equipment, whether or not the machinery or equipment is in operation. 2012 income tax forms 1040ez The chassis could not, because of its special design and without substantial structural modification, be used as part of a vehicle designed to carry any other load. 2012 income tax forms 1040ez Vehicles specially designed for off-highway transportation. 2012 income tax forms 1040ez A vehicle is not treated as a highway vehicle if the vehicle is specially designed for the primary function of transporting a particular type of load other than over the public highway and because of this special design, the vehicles's capability to transport a load over a public highway is substantially limited or impaired. 2012 income tax forms 1040ez To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety, or other requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. 2012 income tax forms 1040ez It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. 2012 income tax forms 1040ez Nontransportation trailers and semitrailers. 2012 income tax forms 1040ez A trailer or semitrailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway site. 2012 income tax forms 1040ez For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle. 2012 income tax forms 1040ez Gross vehicle weight. 2012 income tax forms 1040ez   The tax does not apply to truck chassis and bodies suitable for use with a vehicle that has a gross vehicle weight (defined below) of 33,000 pounds or less. 2012 income tax forms 1040ez It also does not apply to truck trailer and semitrailer chassis and bodies suitable for use with a trailer or semitrailer that has a gross vehicle weight of 26,000 pounds or less. 2012 income tax forms 1040ez Tractors that have a gross vehicle weight of 19,500 pounds or less and a gross combined weight of 33,000 pounds or less are excluded from the 12% retail tax. 2012 income tax forms 1040ez   The following four classifications of truck body types meet the suitable for use standard and will be excluded from the retail excise tax. 2012 income tax forms 1040ez Platform truck bodies 21 feet or less in length. 2012 income tax forms 1040ez Dry freight and refrigerated truck van bodies 24 feet or less in length. 2012 income tax forms 1040ez Dump truck bodies with load capacities of 8 cubic yards or less. 2012 income tax forms 1040ez Refuse packer truck bodies with load capacities of 20 cubic yards or less. 2012 income tax forms 1040ez For more information on these classifications, see Revenue Procedure 2005-19, which is on page 832 of I. 2012 income tax forms 1040ez R. 2012 income tax forms 1040ez B. 2012 income tax forms 1040ez 2005-14 at www. 2012 income tax forms 1040ez irs. 2012 income tax forms 1040ez gov/pub/irs-irbs/irb05-14. 2012 income tax forms 1040ez pdf. 2012 income tax forms 1040ez   The gross vehicle weight means the maximum total weight of a loaded vehicle. 2012 income tax forms 1040ez Generally, this maximum total weight is the gross vehicle weight rating provided by the manufacturer or determined by the seller of the completed article. 2012 income tax forms 1040ez The seller's gross vehicle weight rating is determined solely on the basis of the strength of the chassis frame and the axle capacity and placement. 2012 income tax forms 1040ez The seller may not take into account any readily attachable components (such as tires or rim assemblies) in determining the gross vehicle weight. 2012 income tax forms 1040ez See Regulations section 145. 2012 income tax forms 1040ez 4051-1(e)(3) for more information. 2012 income tax forms 1040ez Parts or accessories. 2012 income tax forms 1040ez   The tax applies to parts or accessories sold on or in connection with, or with the sale of, a taxable article. 2012 income tax forms 1040ez For example, if at the time of the sale by the retailer, the part or accessory has been ordered from the retailer, the part or accessory will be considered as sold in connection with the sale of the vehicle. 2012 income tax forms 1040ez The tax applies in this case whether or not the retailer bills the parts or accessories separately. 2012 income tax forms 1040ez   If the retailer sells a taxable chassis, body, or tractor without parts or accessories considered essential for the operation or appearance of the taxable article, the sale of the parts or accessories by the retailer to the purchaser is considered made in connection with the sale of the taxable article even though they are shipped separately, at the same time, or on a different date. 2012 income tax forms 1040ez The tax applies unless there is evidence to the contrary. 2012 income tax forms 1040ez For example, if a retailer sells to any person a chassis and the bumpers for the chassis, or sells a taxable tractor and the fifth wheel and attachments, the tax applies to the parts or accessories regardless of the method of billing or the time at which the shipments were made. 2012 income tax forms 1040ez The tax does not apply to parts and accessories that are spares or replacements. 2012 income tax forms 1040ez   The tax imposed on parts and accessories sold on or in connection with the taxable articles listed earlier and the tax imposed on the separate purchase of parts and accessories (discussed next) for the taxable articles listed earlier do not apply to an idling reduction device or insulation that has an R value of at least R35 per inch. 2012 income tax forms 1040ez Idling reduction device. 2012 income tax forms 1040ez   An idling reduction device is any device or system of devices that provide the tractor with services, such as heat, air conditioning, and electricity, without the use of the main drive engine while the tractor is temporarily parked or stationary. 2012 income tax forms 1040ez The device must be affixed to the tractor and determined by the Administrator of the EPA, in consultation with the Secretary of Energy and Secretary of Transportation, to reduce idling while parked or stationary. 2012 income tax forms 1040ez The EPA discusses idling reduction technologies on its website at www. 2012 income tax forms 1040ez epa. 2012 income tax forms 1040ez gov/smartway/technology/idling. 2012 income tax forms 1040ez htm. 2012 income tax forms 1040ez Separate purchase. 2012 income tax forms 1040ez   The tax generally applies to the price of a part or accessory and its installation if the following conditions are met. 2012 income tax forms 1040ez The owner, lessee, or operator of any vehicle that contains a taxable article installs any part or accessory on the vehicle. 2012 income tax forms 1040ez The installation occurs within 6 months after the vehicle is first placed in service. 2012 income tax forms 1040ez   The owners of the trade or business installing the parts or accessories are secondarily liable for the tax. 2012 income tax forms 1040ez   A vehicle is placed in service on the date the owner takes actual possession of the vehicle. 2012 income tax forms 1040ez This date is established by a signed delivery ticket or other comparable document indicating delivery to and acceptance by the owner. 2012 income tax forms 1040ez   The tax does not apply if the installed part or accessory is a replacement part or accessory. 2012 income tax forms 1040ez The tax also does not apply if the total price of the parts and accessories, including installation charges, during the 6-month period is $1,000 or less. 2012 income tax forms 1040ez However, if the total price is more than $1,000, the tax applies to the cost of all parts and accessories (and installation charges) during that period. 2012 income tax forms 1040ez Example. 2012 income tax forms 1040ez You bought a taxable vehicle and placed it in service on April 8. 2012 income tax forms 1040ez On May 3, you bought and installed parts and accessories at a cost of $850. 2012 income tax forms 1040ez On July 15, you bought and installed parts and accessories for $300. 2012 income tax forms 1040ez Tax of $138 (12% of $1,150) applies on July 15. 2012 income tax forms 1040ez Also, tax will apply to any costs of additional parts and accessories installed on the vehicle before October 8. 2012 income tax forms 1040ez First retail sale defined. 2012 income tax forms 1040ez   The sale of an article is treated as the first retail sale, and the seller will be liable for the tax imposed on the sale unless one of the following exceptions applies. 2012 income tax forms 1040ez There has been a prior taxable sale, lease, or use of the article (however, see Tax on resale of tax-paid trailers and semitrailers, later). 2012 income tax forms 1040ez The sale qualifies as a tax-free sale under section 4221 (see Sales exempt from tax, later). 2012 income tax forms 1040ez The seller in good faith accepts from the purchaser a statement signed under penalties of perjury and executed in good faith that the purchaser intends to resell the article or lease it on a long-term basis. 2012 income tax forms 1040ez There is no registration requirement. 2012 income tax forms 1040ez Leases. 2012 income tax forms 1040ez   A long-term lease (a lease with a term of 1 year or more, taking into account options to renew) before a first retail sale is treated as a taxable sale. 2012 income tax forms 1040ez The tax is imposed on the lessor at the time of the lease. 2012 income tax forms 1040ez   A short-term lease (a lease with a term of less than 1 year, taking into account options to renew) before a first retail sale is treated as a taxable use. 2012 income tax forms 1040ez The tax is imposed on the lessor at the time of the lease. 2012 income tax forms 1040ez Exported vehicle. 2012 income tax forms 1040ez   A vehicle exported before its first retail sale, used in a foreign country, and then returned to the United States is subject to the retail tax on its first domestic use or retail sale after importation. 2012 income tax forms 1040ez Tax on resale of tax-paid trailers and semitrailers. 2012 income tax forms 1040ez   The tax applies to a trailer or semitrailer resold within 6 months after having been sold in a taxable sale. 2012 income tax forms 1040ez The seller liable for the tax on the resale can claim a credit equal to the tax paid on the prior taxable sale. 2012 income tax forms 1040ez The credit cannot exceed the tax on the resale. 2012 income tax forms 1040ez See Regulations section 145. 2012 income tax forms 1040ez 4052-1(a)(4) for information on the conditions to allowance for the credit. 2012 income tax forms 1040ez Use treated as sale. 2012 income tax forms 1040ez   If any person uses a taxable article before the first retail sale of the article, that person is liable for the tax as if the article had been sold at retail by that person. 2012 income tax forms 1040ez Figure the tax on the price at which similar articles are sold in the ordinary course of trade by retailers. 2012 income tax forms 1040ez The tax attaches when the use begins. 2012 income tax forms 1040ez   If the seller of an article regularly sells the articles at retail in arm's-length transactions, figure the tax on its use on the lowest established retail price for the articles in effect at the time of the taxable use. 2012 income tax forms 1040ez   If the seller of an article does not regularly sell the articles at retail in arm's-length transactions, a constructive price on which the tax is figured will be determined by the IRS after considering the selling practices and price structures of sellers of similar articles. 2012 income tax forms 1040ez   If a seller of an article incurs liability for tax on the use of the article and later sells or leases the article in a transaction that otherwise would be taxable, liability for tax is not incurred on the later sale or lease. 2012 income tax forms 1040ez Presumptive retail sales price. 2012 income tax forms 1040ez   There are rules to ensure that the tax base of transactions considered to be taxable sales includes either an actual or presumed markup percentage. 2012 income tax forms 1040ez If the person liable for tax is the vehicle's manufacturer, producer, or importer, the following discussions show how you figure the presumptive retail sales price depending on the type of transaction and the persons involved in the transaction. 2012 income tax forms 1040ez Table 6-1 outlines the appropriate tax base calculation for various transactions. 2012 income tax forms 1040ez   The presumed markup percentage to be used for trucks and truck-tractors is 4%. 2012 income tax forms 1040ez But for truck trailers and semitrailers and remanufactured trucks and tractors, the presumed markup percentage is zero. 2012 income tax forms 1040ez Sale. 2012 income tax forms 1040ez   For a taxable sale by a manufacturer, producer, importer, or related person, you generally figure the tax on a tax base of the sales price plus an amount equal to the presumed markup percentage times that sales price. 2012 income tax forms 1040ez Long-term lease. 2012 income tax forms 1040ez   In the case of a long-term lease by a manufacturer, producer, importer, or related person, figure the tax on a tax base of the constructive sales price plus an amount equal to the presumed markup percentage times the constructive sales price. 2012 income tax forms 1040ez Short-term lease. 2012 income tax forms 1040ez   When a manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a constructive sales price at which those or similar articles generally are sold in the ordinary course of trade by retailers. 2012 income tax forms 1040ez   But if the lessor in this situation regularly sells articles at retail in arm's-length transactions, figure the tax on the lowest established retail price in effect at the time of the taxable use. 2012 income tax forms 1040ez   If a person other than the manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a tax base of the price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor and a presumed markup percentage. 2012 income tax forms 1040ez Related person. 2012 income tax forms 1040ez   A related person is any member of the same controlled group as the manufacturer, producer, or importer. 2012 income tax forms 1040ez Do not treat as a related person a person that sells the articles through a permanent retail establishment in the normal course of being a retailer if that person has records to prove the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. 2012 income tax forms 1040ez Table 6-1. 2012 income tax forms 1040ez Tax Base IF the transaction is a. 2012 income tax forms 1040ez . 2012 income tax forms 1040ez . 2012 income tax forms 1040ez THEN figuring the base by using the. 2012 income tax forms 1040ez . 2012 income tax forms 1040ez . 2012 income tax forms 1040ez Sale by the manufacturer, producer, importer, or related person Sales price plus (presumed markup percentage × sales price) Sale by the dealer Total consideration paid for the item including any charges incident to placing it in a condition ready for use Long-term lease by the manufacturer, producer, importer, or related person Constructive sales price plus (presumed markup percentage × constructive sales price) Short-term lease by the manufacturer, producer, importer, or related person Constructive sales price at which such or similar articles are sold Short-term lease by a lessor other than the manufacturer, producer, importer, or related person Price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor plus a presumed markup percentage Short-term lease where the articles are regularly sold at arm's length Lowest established retail price in effect at the time of the taxable use General rule for sales by dealers to the consumer. 2012 income tax forms 1040ez   For a taxable sale, other than a long-term lease, by a person other than a manufacturer, producer, importer, or related person, your tax base is the retail sales price as discussed next under Determination of tax base. 2012 income tax forms 1040ez   When you sell an article to the consumer, generally you do not add a presumed markup to the tax base. 2012 income tax forms 1040ez However, you do add a markup if all the following apply. 2012 income tax forms 1040ez You do not perform any significant activities relating to the processing of the sale of a taxable article. 2012 income tax forms 1040ez The main reason for processing the sale through you is to avoid or evade the presumed markup. 2012 income tax forms 1040ez You do not have records proving that the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. 2012 income tax forms 1040ez In these situations, your tax base is the sales price plus an amount equal to the presumed markup percentage times that selling price. 2012 income tax forms 1040ez Determination of tax base. 2012 income tax forms 1040ez   These rules apply to both normal retail sales price and presumptive retail sales price computations. 2012 income tax forms 1040ez To arrive at the tax base, the price is the total consideration paid (including trade-in allowance) for the item and includes any charge incident to placing the article in a condition ready for use. 2012 income tax forms 1040ez However, see Presumptive retail sales price, earlier. 2012 income tax forms 1040ez Exclusions from tax base. 2012 income tax forms 1040ez   Exclude from the tax base the retail excise tax imposed on the sale. 2012 income tax forms 1040ez Exclude any state or local retail sales tax if stated as a separate charge from the price whether the sales tax is imposed on the seller or purchaser. 2012 income tax forms 1040ez Also exclude the value of any used component of the article furnished by the first user of the article. 2012 income tax forms 1040ez   Exclude charges for transportation, delivery, insurance, and installation (other than installation charges for parts and accessories, discussed earlier) and other expenses incurred in connection with the delivery of an article to a purchaser. 2012 income tax forms 1040ez These expenses are those incurred in delivery from the retail dealer to the customer. 2012 income tax forms 1040ez In the case of delivery directly from the manufacturer to the dealer's customer, include the transportation and delivery charges to the extent the charges do not exceed what it would have cost to ship the article to the dealer. 2012 income tax forms 1040ez   Exclude amounts charged for machinery or equipment that does not contribute to the highway transportation function of the vehicle, provided those charges are supported by adequate records. 2012 income tax forms 1040ez For example, for an industrial vacuum loader vehicle, exclude amounts charged for the vacuum pump and hose, filter system, material separator, silencer or muffler, control cabinet, and ladder. 2012 income tax forms 1040ez Similarly, for a sewer cleaning vehicle, exclude amounts charged for the high pressure water pump, hose components, and the vacuum pipe. 2012 income tax forms 1040ez Sales not at arm's length. 2012 income tax forms 1040ez   For any taxable article sold (not at arm's length) at less than the fair market price, figure the excise tax on the price for which similar articles are sold at retail in the ordinary course of trade. 2012 income tax forms 1040ez   A sale is not at arm's length if either of the following apply. 2012 income tax forms 1040ez One of the parties is controlled (in law or in fact) by the other or there is common control, whether or not the control is actually exercised to influence the sales price. 2012 income tax forms 1040ez The sale is made under special arrangements between a seller and a purchaser. 2012 income tax forms 1040ez Installment sales. 2012 income tax forms 1040ez   If the first retail sale is an installment sale, or other form of sale in which the sales price is paid in installments, tax liability arises at the time of the sale. 2012 income tax forms 1040ez The tax is figured on the entire sales price. 2012 income tax forms 1040ez No part of the tax is deferred because the sales price is paid in installments. 2012 income tax forms 1040ez Repairs and modifications. 2012 income tax forms 1040ez   The tax does not apply to the sale or use of an article that has been repaired or modified unless the cost of the repairs and modifications is more than 75% of the retail price of a comparable new article. 2012 income tax forms 1040ez This includes modifications that change the transportation function of an article or restore a wrecked article to a functional condition. 2012 income tax forms 1040ez However, this exception generally does not apply to an article that was not subject to the tax when it was new. 2012 income tax forms 1040ez Further manufacture. 2012 income tax forms 1040ez   The tax does not apply to the use by a person of a taxable article as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by that person. 2012 income tax forms 1040ez Do not treat a person as engaged in the manufacture of any article merely because that person combines the article with a: Coupling device (including any fifth wheel); Wrecker crane; Loading and unloading equipment (including any crane, hoist, winch, or power liftgate); Aerial ladder or tower; Ice and snow control equipment; Earth moving, excavation, and construction equipment; Spreader; Sleeper cab; Cab shield; or Wood or metal floor. 2012 income tax forms 1040ez Combining an article with an item in this list does not give rise to taxability. 2012 income tax forms 1040ez However, see Parts or accessories discussed earlier. 2012 income tax forms 1040ez Articles exempt from tax. 2012 income tax forms 1040ez   The tax on heavy trucks, trailers, and tractors does not apply to sales of the articles described in the following discussions. 2012 income tax forms 1040ez Rail trailers and rail vans. 2012 income tax forms 1040ez   This is any chassis or body of a trailer or semitrailer designed for use both as a highway vehicle and a railroad car (including any parts and accessories designed primarily for use on and in connection with it). 2012 income tax forms 1040ez Do not treat a piggyback trailer or semitrailer as designed for use as a railroad car. 2012 income tax forms 1040ez Parts and accessories. 2012 income tax forms 1040ez   This is any part or accessory sold separately from the truck or trailer, except as described earlier under Parts or accessories and Separate purchase. 2012 income tax forms 1040ez Trash containers. 2012 income tax forms 1040ez   This is any box, container, receptacle, bin, or similar article that meets all the following conditions. 2012 income tax forms 1040ez It is designed to be used as a trash container. 2012 income tax forms 1040ez It is not designed to carry freight other than trash. 2012 income tax forms 1040ez It is not designed to be permanently mounted on or affixed to a truck chassis or body. 2012 income tax forms 1040ez House trailers. 2012 income tax forms 1040ez   This is any house trailer (regardless of size) suitable for use in connection with either passenger automobiles or trucks. 2012 income tax forms 1040ez Camper coaches or bodies for self-propelled mobile homes. 2012 income tax forms 1040ez   This is any article designed to be mounted or placed on trucks, truck chassis, or automobile chassis and to be used primarily as living quarters or camping accommodations. 2012 income tax forms 1040ez Further, the tax does not apply to chassis specifically designed and constructed to accommodate and transport self-propelled mobile home bodies. 2012 income tax forms 1040ez Farm feed, seed, and fertilizer equipment. 2012 income tax forms 1040ez   This is any body primarily designed to process or prepare, haul, spread, load, or unload feed, seed, or fertilizer to or on farms. 2012 income tax forms 1040ez This exemption applies only to the farm equipment body (and parts and accessories) and not to the chassis upon which the farm equipment is mounted. 2012 income tax forms 1040ez Ambulances and hearses. 2012 income tax forms 1040ez   This is any ambulance, hearse, or combination ambulance-hearse. 2012 income tax forms 1040ez Truck-tractors. 2012 income tax forms 1040ez   This is any truck-tractor specifically designed for use in shifting semitrailers in and around freight yards and freight terminals. 2012 income tax forms 1040ez Concrete mixers. 2012 income tax forms 1040ez   This is any article designed to be placed or mounted on a truck, truck trailer, or semitrailer chassis to be used to process or prepare concrete. 2012 income tax forms 1040ez This exemption does not apply to the chassis on which the article is mounted. 2012 income tax forms 1040ez Sales exempt from tax. 2012 income tax forms 1040ez   The following sales are ordinarily exempt from tax. 2012 income tax forms 1040ez Sales to a state or local government for its exclusive use. 2012 income tax forms 1040ez Sales to Indian tribal governments, but only if the transaction involves the exercise of an essential tribal government function. 2012 income tax forms 1040ez Sales to a nonprofit educational organization for its exclusive use. 2012 income tax forms 1040ez Sales to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. 2012 income tax forms 1040ez Sales for use by the purchaser for further manufacture of other taxable articles (see below). 2012 income tax forms 1040ez Sales for export or for resale by the purchaser to a second purchaser for export. 2012 income tax forms 1040ez Sales to the United Nations for official use. 2012 income tax forms 1040ez Registration requirement. 2012 income tax forms 1040ez   In general, the seller and buyer must be registered for a sale to be tax free. 2012 income tax forms 1040ez See the Form 637 instructions for more information. 2012 income tax forms 1040ez Certain registration exceptions apply in the case of sales to state and local governments, sales to foreign purchasers for export, and sales for resale or long term leasing. 2012 income tax forms 1040ez Further manufacture. 2012 income tax forms 1040ez   If you buy articles tax free and resell or use them other than in the manufacture of another article, you are liable for the tax on their resale or use just as if you had manufactured and made the first retail sale of them. 2012 income tax forms 1040ez Credits or refunds. 2012 income tax forms 1040ez   A credit or refund (without interest) of the retail tax on the taxable articles described earlier may be allowable if the tax has been paid with respect to an article and, before any other use, such article is used by any person as a component part of another taxable article manufactured or produced. 2012 income tax forms 1040ez The person using the article as a component part is eligible for the credit or refund. 2012 income tax forms 1040ez   A credit or refund is allowable if, before any other use, an article is, by any person: Exported, Used or sold for use as supplies for vessels, Sold to a state or local government for its exclusive use, Sold to a nonprofit educational organization for its exclusive use, or Sold to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. 2012 income tax forms 1040ez A credit or refund is also allowable if there is a price readjustment by reason of the return or repossession of an article or by reason of a bona fide discount, rebate, or allowance. 2012 income tax forms 1040ez   See also Conditions to allowance in chapter 5. 2012 income tax forms 1040ez Tire credit. 2012 income tax forms 1040ez   A credit is allowed against the retail tax on the taxable articles described earlier if taxable tires are sold on or in connection with the sale of the article. 2012 income tax forms 1040ez The credit is equal to the manufacturers excise tax imposed on the taxable tires (discussed earlier). 2012 income tax forms 1040ez This is the section 4051(d) taxable tire credit and is claimed on Schedule C (Form 720) for the same quarter for which the tax on the heavy vehicle is reported. 2012 income tax forms 1040ez Prev  Up  Next   Home   More Online Publications
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The 2012 Income Tax Forms 1040ez

2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Adjustment for premium. 2012 income tax forms 1040ez Adjustment for acquisition premium. 2012 income tax forms 1040ez Adjustment for market discount. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez “Original issue discount” is defined first. 2012 income tax forms 1040ez The other terms are listed alphabetically. 2012 income tax forms 1040ez Original issue discount (OID). 2012 income tax forms 1040ez   OID is a form of interest. 2012 income tax forms 1040ez 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). 2012 income tax forms 1040ez Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. 2012 income tax forms 1040ez Accrual period. 2012 income tax forms 1040ez   An accrual period is an interval of time used to measure OID. 2012 income tax forms 1040ez The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. 2012 income tax forms 1040ez Acquisition premium. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. 2012 income tax forms 1040ez See Premium, later. 2012 income tax forms 1040ez Adjusted issue price. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Debt instrument. 2012 income tax forms 1040ez   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). 2012 income tax forms 1040ez It generally does not include an annuity contract. 2012 income tax forms 1040ez Issue price. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Market discount. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez The market discount is the difference between the issue price plus accrued OID and your adjusted basis. 2012 income tax forms 1040ez Premium. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez The premium is the excess of the adjusted basis over the payable amounts. 2012 income tax forms 1040ez See Publication 550 for information on the tax treatment of bond premium. 2012 income tax forms 1040ez Qualified stated interest. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Stated redemption price at maturity. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Yield to maturity (YTM). 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. 2012 income tax forms 1040ez If you do not have this information, consult your broker, tax advisor, or the issuer. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez The following discussions explain what information is contained in each section of the list. 2012 income tax forms 1040ez Section I. 2012 income tax forms 1040ez   This section contains publicly offered, long-term debt instruments. 2012 income tax forms 1040ez Section I-A: Corporate Debt Instruments Issued Before 1985. 2012 income tax forms 1040ez Section I-B: Corporate Debt Instruments Issued After 1984. 2012 income tax forms 1040ez Section I-C: Inflation-Indexed Debt Instruments. 2012 income tax forms 1040ez For each publicly offered debt instrument in Section I, the list contains the following information. 2012 income tax forms 1040ez The name of the issuer. 2012 income tax forms 1040ez The Committee on Uniform Security Identification Procedures (CUSIP) number. 2012 income tax forms 1040ez The issue date. 2012 income tax forms 1040ez The maturity date. 2012 income tax forms 1040ez The issue price expressed as a percent of principal or of stated redemption price at maturity. 2012 income tax forms 1040ez The annual stated or coupon interest rate. 2012 income tax forms 1040ez (This rate is shown as 0. 2012 income tax forms 1040ez 00 if no annual interest payments are provided. 2012 income tax forms 1040ez ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. 2012 income tax forms 1040ez The total OID accrued up to January 1 of a calendar year. 2012 income tax forms 1040ez (This information is not available for every instrument. 2012 income tax forms 1040ez ) 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. 2012 income tax forms 1040ez The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. 2012 income tax forms 1040ez Section II. 2012 income tax forms 1040ez   This section contains stripped coupons and principal components of U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez Treasury and Government-Sponsored Enterprise debt instruments. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez This section also includes debt instruments backed by U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez Treasury securities that represent ownership interests in those securities. 2012 income tax forms 1040ez   The obligations listed in Section II are arranged by maturity date. 2012 income tax forms 1040ez The amounts listed are the total OID for a calendar year per $1,000 of redemption price. 2012 income tax forms 1040ez Section III. 2012 income tax forms 1040ez   This section contains short-term discount obligations. 2012 income tax forms 1040ez Section III-A: Short-Term U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez Treasury Bills. 2012 income tax forms 1040ez Section III-B: Federal Home Loan Banks. 2012 income tax forms 1040ez Section III-C: Federal National Mortgage Association. 2012 income tax forms 1040ez Section III-D: Federal Farm Credit Banks. 2012 income tax forms 1040ez Section III-E: Federal Home Loan Mortgage Corporation. 2012 income tax forms 1040ez Section III-F: Federal Agricultural Mortgage Corporation. 2012 income tax forms 1040ez    Information that supplements Section III-A is available on the Internet at http://www. 2012 income tax forms 1040ez treasurydirect. 2012 income tax forms 1040ez gov/tdhome. 2012 income tax forms 1040ez htm. 2012 income tax forms 1040ez   The short-term obligations listed in this section are arranged by maturity date. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. 2012 income tax forms 1040ez U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez savings bonds. 2012 income tax forms 1040ez Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. 2012 income tax forms 1040ez Obligations issued by tax-exempt organizations. 2012 income tax forms 1040ez OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. 2012 income tax forms 1040ez Mortgage-backed securities and mortgage participation certificates. 2012 income tax forms 1040ez Long-term OID debt instruments issued before May 28, 1969. 2012 income tax forms 1040ez Short-term obligations, other than the obligations listed in Section III. 2012 income tax forms 1040ez Debt instruments issued at a discount by states or their political subdivisions. 2012 income tax forms 1040ez REMIC regular interests and CDOs. 2012 income tax forms 1040ez Commercial paper and banker's acceptances issued at a discount. 2012 income tax forms 1040ez Obligations issued at a discount by individuals. 2012 income tax forms 1040ez Foreign obligations not traded in the United States and obligations not issued in the United States. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez See Backup Withholding, later. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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). 2012 income tax forms 1040ez Electronic payee statements. 2012 income tax forms 1040ez   You can issue Form 1099-OID electronically with the consent of the recipient. 2012 income tax forms 1040ez More information. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. 2012 income tax forms 1040ez Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez A special rule is used to determine the original issue price for information reporting on U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez Treasury bills (T-bills) listed in Section III-A. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Example 1. 2012 income tax forms 1040ez There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. 2012 income tax forms 1040ez The price actually paid by the owner cannot be established by owner or middleman records. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez For this purpose, you can rely on Section I of the OID list to determine the following information. 2012 income tax forms 1040ez Whether a debt instrument has OID. 2012 income tax forms 1040ez The OID to be reported on the Form 1099-OID. 2012 income tax forms 1040ez In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. 2012 income tax forms 1040ez You also can report OID on other long-term debt instruments. 2012 income tax forms 1040ez Form 1099-OID. 2012 income tax forms 1040ez   On Form 1099-OID for a calendar year show the following information. 2012 income tax forms 1040ez Box 1. 2012 income tax forms 1040ez The OID for the actual dates the owner held the debt instruments during a calendar year. 2012 income tax forms 1040ez To determine this amount, see Figuring OID, next. 2012 income tax forms 1040ez Box 2. 2012 income tax forms 1040ez The qualified stated interest paid or credited during the calendar year. 2012 income tax forms 1040ez Interest reported here is not reported on Form 1099-INT. 2012 income tax forms 1040ez The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. 2012 income tax forms 1040ez Box 3. 2012 income tax forms 1040ez Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. 2012 income tax forms 1040ez Do not reduce the amounts in boxes 1 and 2 by the forfeiture. 2012 income tax forms 1040ez Box 4. 2012 income tax forms 1040ez Any backup withholding for this debt instrument. 2012 income tax forms 1040ez Box 7. 2012 income tax forms 1040ez The CUSIP number, if any. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 50 2006). 2012 income tax forms 1040ez If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. 2012 income tax forms 1040ez Box 8. 2012 income tax forms 1040ez The OID on a U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez Treasury obligation for the part of the year the owner held the debt instrument. 2012 income tax forms 1040ez Box 9. 2012 income tax forms 1040ez Investment expenses passed on to holders of a single-class REMIC. 2012 income tax forms 1040ez Boxes 10-12. 2012 income tax forms 1040ez Use to report any state income tax withheld for this debt instrument. 2012 income tax forms 1040ez Figuring OID. 2012 income tax forms 1040ez   You can determine the OID on a long-term debt instrument by using either of the following. 2012 income tax forms 1040ez Section I of the OID list. 2012 income tax forms 1040ez The income tax regulations. 2012 income tax forms 1040ez Using Section I. 2012 income tax forms 1040ez   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. 2012 income tax forms 1040ez   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. 2012 income tax forms 1040ez Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. 2012 income tax forms 1040ez Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. 2012 income tax forms 1040ez Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. 2012 income tax forms 1040ez Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. 2012 income tax forms 1040ez If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. 2012 income tax forms 1040ez Report the result on Form 1099-OID in box 1. 2012 income tax forms 1040ez Using the income tax regulations. 2012 income tax forms 1040ez   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez (If you use Section I-B, the OID is figured using 6-month accrual periods. 2012 income tax forms 1040ez )   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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez You must file an information return showing the reportable interest and OID, if any, on the CD. 2012 income tax forms 1040ez These rules apply whether or not you sold the CD to the owner. 2012 income tax forms 1040ez Report OID on a CD in the same way as OID on other debt instruments. 2012 income tax forms 1040ez See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez However, do not report the interest if either of the following apply. 2012 income tax forms 1040ez You hold the bond as a nominee for the true owner. 2012 income tax forms 1040ez The payee is a foreign person. 2012 income tax forms 1040ez See Payments to foreign person under Backup Withholding, later. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez The coupon may have been “stripped” (separated) from the bond and separately purchased. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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%. 2012 income tax forms 1040ez The backup withholding is deducted at the time a cash payment is made. 2012 income tax forms 1040ez See Pub. 2012 income tax forms 1040ez 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. 2012 income tax forms 1040ez Backup withholding generally applies in the following situations. 2012 income tax forms 1040ez The payee does not give you a taxpayer identification number (TIN). 2012 income tax forms 1040ez The IRS notifies you that the payee gave an incorrect TIN. 2012 income tax forms 1040ez The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Short-term obligations. 2012 income tax forms 1040ez   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. 2012 income tax forms 1040ez However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. 2012 income tax forms 1040ez Long-term obligations. 2012 income tax forms 1040ez   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. 2012 income tax forms 1040ez The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. 2012 income tax forms 1040ez The amount to be withheld is limited to the cash paid. 2012 income tax forms 1040ez Registered long-term obligations with cash payments. 2012 income tax forms 1040ez   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez For any payment, the required withholding is limited to the cash paid. 2012 income tax forms 1040ez Payee not the original owner. 2012 income tax forms 1040ez   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). 2012 income tax forms 1040ez The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. 2012 income tax forms 1040ez Bearer long-term obligations with cash payments. 2012 income tax forms 1040ez   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez The required withholding at maturity is limited to the cash paid. 2012 income tax forms 1040ez Sales and redemptions. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Backup withholding applies in the following situations. 2012 income tax forms 1040ez The payee does not give you a TIN. 2012 income tax forms 1040ez The IRS notifies you that the payee gave an incorrect TIN. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Payments outside the United States to U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez person. 2012 income tax forms 1040ez   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez trade or business. 2012 income tax forms 1040ez Payments to foreign person. 2012 income tax forms 1040ez   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. 2012 income tax forms 1040ez U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez -source amount. 2012 income tax forms 1040ez   Backup withholding and information reporting are not required for payments of U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez -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. 2012 income tax forms 1040ez A U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez resident is not a foreign person. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez person. 2012 income tax forms 1040ez   For information about the 28% withholding tax that may apply to payments of U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez -source OID or interest to foreign persons, see Publication 515. 2012 income tax forms 1040ez Foreign-source amount. 2012 income tax forms 1040ez   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez More information. 2012 income tax forms 1040ez   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. 2012 income tax forms 1040ez 6049-5. 2012 income tax forms 1040ez Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. 2012 income tax forms 1040ez It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez However, the information provided does not cover every situation. 2012 income tax forms 1040ez More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. 2012 income tax forms 1040ez Including OID in income. 2012 income tax forms 1040ez   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. 2012 income tax forms 1040ez Exceptions. 2012 income tax forms 1040ez   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. 2012 income tax forms 1040ez U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez savings bonds. 2012 income tax forms 1040ez Tax-exempt obligations. 2012 income tax forms 1040ez (However, see Tax-Exempt Bonds and Coupons, later. 2012 income tax forms 1040ez ) Obligations issued by individuals before March 2, 1984. 2012 income tax forms 1040ez Loans of $10,000 or less between individuals who are not in the business of lending money. 2012 income tax forms 1040ez (The dollar limit includes outstanding prior loans by the lender to the borrower. 2012 income tax forms 1040ez ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Publication 550 also discusses rules for holders of REMIC interests and CDOs. 2012 income tax forms 1040ez De minimis rule. 2012 income tax forms 1040ez   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. 2012 income tax forms 1040ez 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. 2012 income tax forms 1040ez Debt instruments with de minimis OID are not listed in this publication. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Also, the de minimis rules generally do not apply to tax-exempt obligations. 2012 income tax forms 1040ez Example 2. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. 2012 income tax forms 1040ez Example 3. 2012 income tax forms 1040ez Assume the same facts as Example 2, except the debt instrument was issued at $950. 2012 income tax forms 1040ez You must report part of the $50 OID each year because it is more than $25. 2012 income tax forms 1040ez Choice to report all interest as OID. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez See Constant yield method under Debt Instruments Issued After 1984, later, for more information. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez For more information, see Regulations section 1. 2012 income tax forms 1040ez 1272-3. 2012 income tax forms 1040ez Purchase after date of original issue. 2012 income tax forms 1040ez   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. 2012 income tax forms 1040ez If so, the OID reported to you on Form 1099-OID may have to be adjusted. 2012 income tax forms 1040ez For more information, see Showing an OID adjustment under How To Report OID, later. 2012 income tax forms 1040ez The following rules generally do not apply to contingent payment debt instruments. 2012 income tax forms 1040ez Adjustment for premium. 2012 income tax forms 1040ez   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. 2012 income tax forms 1040ez Your adjustment is the total OID shown on your Form 1099-OID. 2012 income tax forms 1040ez Adjustment for acquisition premium. 2012 income tax forms 1040ez   If your debt instrument has acquisition premium, reduce the OID you report. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Adjustment for market discount. 2012 income tax forms 1040ez   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. 2012 income tax forms 1040ez Your adjustment is the accrued market discount for the year. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. 2012 income tax forms 1040ez The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. 2012 income tax forms 1040ez For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. 2012 income tax forms 1040ez 1275-7. 2012 income tax forms 1040ez Sale, exchange, or redemption. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. 2012 income tax forms 1040ez Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Your basis, generally, is your cost increased by the OID you have included in income each year you held it. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. 2012 income tax forms 1040ez Example 4. 2012 income tax forms 1040ez Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. 2012 income tax forms 1040ez 00 on November 1 of Year 1. 2012 income tax forms 1040ez The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. 2012 income tax forms 1040ez The debt instrument provides for semiannual payments of interest at 10%. 2012 income tax forms 1040ez Assume the debt instrument is a capital asset in Larry's hands. 2012 income tax forms 1040ez The debt instrument has $13,765. 2012 income tax forms 1040ez 00 of OID ($100,000 stated redemption price at maturity minus $86,235. 2012 income tax forms 1040ez 00 issue price). 2012 income tax forms 1040ez Larry sold the debt instrument for $90,000 on November 1 of Year 4. 2012 income tax forms 1040ez Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. 2012 income tax forms 1040ez 00 of OID in income and has increased his basis by that amount to $90,791. 2012 income tax forms 1040ez 00. 2012 income tax forms 1040ez Larry has realized a loss of $791. 2012 income tax forms 1040ez 00. 2012 income tax forms 1040ez All of Larry's loss is capital loss. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Form 1099-OID shows all OID income in box 1 except OID on a U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez Treasury obligation, which is shown in box 8. 2012 income tax forms 1040ez It also shows, in box 2, any qualified stated interest you must include in income. 2012 income tax forms 1040ez (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. 2012 income tax forms 1040ez ) A copy of Form 1099-OID will be sent to the IRS. 2012 income tax forms 1040ez Do not attach your copy to your tax return. 2012 income tax forms 1040ez Keep it for your records. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Form 1099-OID not received. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Refiguring OID. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez You bought the debt instrument at a premium or at an acquisition premium. 2012 income tax forms 1040ez The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez Treasury securities). 2012 income tax forms 1040ez The debt instrument is a contingent payment or inflation-indexed debt instrument. 2012 income tax forms 1040ez See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. 2012 income tax forms 1040ez Refiguring interest. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Nominee. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. 2012 income tax forms 1040ez Show the owner of the debt instrument as the “recipient” and you as the “payer. 2012 income tax forms 1040ez ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. 2012 income tax forms 1040ez You must also give a copy of the Form 1099-OID to the actual owner. 2012 income tax forms 1040ez However, you are not required to file a nominee return to show amounts belonging to your spouse. 2012 income tax forms 1040ez See the Form 1099 instructions for more information. 2012 income tax forms 1040ez   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Form 1040 or Form 1040A required. 2012 income tax forms 1040ez   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. 2012 income tax forms 1040ez You received a Form 1099-OID as a nominee for the actual owner. 2012 income tax forms 1040ez Your total interest and OID income for the year was more than $1,500. 2012 income tax forms 1040ez Form 1040 required. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Also, you must use Form 1040 if you were charged an early withdrawal penalty. 2012 income tax forms 1040ez Where to report. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. 2012 income tax forms 1040ez Also include any other OID and interest income for which you did not receive a Form 1099. 2012 income tax forms 1040ez Showing an OID adjustment. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. 2012 income tax forms 1040ez Under your last entry on line 1, subtotal all interest and OID income listed on line 1. 2012 income tax forms 1040ez Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. 2012 income tax forms 1040ez Subtract that OID from the subtotal and enter the result on line 2. 2012 income tax forms 1040ez If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. 2012 income tax forms 1040ez Under your last entry on line 1, subtotal all interest and OID income listed on line 1. 2012 income tax forms 1040ez Below the subtotal, write “OID Adjustment” and show the additional OID. 2012 income tax forms 1040ez Add that OID to the subtotal and enter the result on line 2. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez It also may depend on the type of the debt instrument. 2012 income tax forms 1040ez There are different rules for each of the following debt instruments. 2012 income tax forms 1040ez Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. 2012 income tax forms 1040ez Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. 2012 income tax forms 1040ez Debt instruments issued after July 1, 1982, and before 1985. 2012 income tax forms 1040ez Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). 2012 income tax forms 1040ez Contingent payment debt instruments issued after August 12, 1996. 2012 income tax forms 1040ez Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. 2012 income tax forms 1040ez Zero coupon bonds. 2012 income tax forms 1040ez   The rules for figuring OID on zero coupon bonds backed by U. 2012 income tax forms 1040ez S. 2012 income tax forms 1040ez Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez The OID, which is taxed as ordinary income, generally equals the following amount. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. 2012 income tax forms 1040ez Your basis in the debt instrument is increased by the OID you include in income. 2012 income tax forms 1040ez Form 1099-OID. 2012 income tax forms 1040ez   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. 2012 income tax forms 1040ez However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. 2012 income tax forms 1040ez See Reduction for acquisition premium, later. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez irs. 2012 income tax forms 1040ez gov/pub1212 by clicking the link under Recent Developments. 2012 income tax forms 1040ez Form 1099-OID not received. 2012 income tax forms 1040ez    The OID listed is for each $1,000 of redemption price. 2012 income tax forms 1040ez You must adjust the listed amount if your debt instrument has a different principal amount. 2012 income tax forms 1040ez For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. 2012 income tax forms 1040ez   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. 2012 income tax forms 1040ez (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. 2012 income tax forms 1040ez ) If you did not hold the debt instrument the entire year, figure your OID using the following method. 2012 income tax forms 1040ez Divide the OID shown by 12. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez This is the OID to include in income unless you paid an acquisition premium. 2012 income tax forms 1040ez The reduction for acquisition premium is discussed next. 2012 income tax forms 1040ez Reduction for acquisition premium. 2012 income tax forms 1040ez   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez This is the monthly OID. 2012 income tax forms 1040ez Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. 2012 income tax forms 1040ez (If the result is zero or less, stop here. 2012 income tax forms 1040ez You did not pay an acquisition premium. 2012 income tax forms 1040ez ) 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. 2012 income tax forms 1040ez Subtract the amount figured in (3) from the amount figured in (1). 2012 income tax forms 1040ez This is the OID to include in income for each month you hold the debt instrument during the year. 2012 income tax forms 1040ez Transfers during the month. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez For information about showing the correct OID on your tax return, see How To Report OID, earlier. 2012 income tax forms 1040ez Form 1099-OID. 2012 income tax forms 1040ez   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. 2012 income tax forms 1040ez However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. 2012 income tax forms 1040ez See Constant yield method and the discussions on acquisition premium that follow, later. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez irs. 2012 income tax forms 1040ez gov/pub1212 by clicking the link under Recent Developments. 2012 income tax forms 1040ez Form 1099-OID not received. 2012 income tax forms 1040ez    The OID listed is for each $1,000 of redemption price. 2012 income tax forms 1040ez You must adjust the listed amount if your debt instrument has a different principal amount. 2012 income tax forms 1040ez For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. 2012 income tax forms 1040ez   If you held the debt instrument the entire year, use the OID shown in Section I-A. 2012 income tax forms 1040ez (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. 2012 income tax forms 1040ez ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. 2012 income tax forms 1040ez Method 1. 2012 income tax forms 1040ez    Divide the total OID for a calendar year by 365 (366 for leap years). 2012 income tax forms 1040ez Multiply the result in (1) by the number of days you held the debt instrument during that particular year. 2012 income tax forms 1040ez  This computation is an approximation and may result in a slightly higher OID than Method 2. 2012 income tax forms 1040ez Method 2. 2012 income tax forms 1040ez    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. 2012 income tax forms 1040ez (See Accrual period under Constant yield method, next. 2012 income tax forms 1040ez ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. 2012 income tax forms 1040ez If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. 2012 income tax forms 1040ez Add the results of (2) and (3). 2012 income tax forms 1040ez This is the OID to include in income, unless you paid an acquisition premium. 2012 income tax forms 1040ez (The reduction for acquisition premium is discussed later. 2012 income tax forms 1040ez ) Constant yield method. 2012 income tax forms 1040ez   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. 2012 income tax forms 1040ez OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. 2012 income tax forms 1040ez   Figure the OID allocable to any accrual period as follows. 2012 income tax forms 1040ez Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. 2012 income tax forms 1040ez Subtract from the result in (1) any qualified stated interest allocable to the accrual period. 2012 income tax forms 1040ez Accrual period. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Your tax year will usually include parts of two accrual periods. 2012 income tax forms 1040ez Daily OID. 2012 income tax forms 1040ez   The OID for any accrual period is allocated equally to each day in the accrual period. 2012 income tax forms 1040ez You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. 2012 income tax forms 1040ez If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. 2012 income tax forms 1040ez Figuring daily OID. 2012 income tax forms 1040ez   The daily OID for the initial accrual period is figured using the following formula. 2012 income tax forms 1040ez   (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. 2012 income tax forms 1040ez Reduction for acquisition premium on debt instruments purchased before July 19, 1984. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Reduction for acquisition premium on debt instruments purchased after July 18, 1984. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. 2012 income tax forms 1040ez To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. 2012 income tax forms 1040ez The numerator is the acquisition premium. 2012 income tax forms 1040ez The denominator is the total OID remaining for the debt instrument after your purchase date. 2012 income tax forms 1040ez Section I-A is available at www. 2012 income tax forms 1040ez irs. 2012 income tax forms 1040ez gov/pub1212 and clicking the link under Recent Developments. 2012 income tax forms 1040ez Using Section I-A to figure accumulated OID. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez The amount from the “Total OID to January 1, YYYY” column for your debt instrument. 2012 income tax forms 1040ez The OID from January 1 of a calendar year to the date of purchase, figured as follows. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Add the amounts figured in (2a) and (2b). 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. 2012 income tax forms 1040ez Your basis in the debt instrument is increased by the OID you include in income. 2012 income tax forms 1040ez For information about showing the correct OID on your tax return, see How To Report OID, earlier. 2012 income tax forms 1040ez Form 1099-OID. 2012 income tax forms 1040ez   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. 2012 income tax forms 1040ez However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. 2012 income tax forms 1040ez See Constant yield method and Reduction for acquisition premium, later. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez irs. 2012 income tax forms 1040ez gov/pub1212 by clicking the link under Recent Developments. 2012 income tax forms 1040ez Form 1099-OID not received. 2012 income tax forms 1040ez   The OID listed is for each $1,000 of redemption price. 2012 income tax forms 1040ez You must adjust the listed amount if your debt instrument has a different principal amount. 2012 income tax forms 1040ez For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. 2012 income tax forms 1040ez   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. 2012 income tax forms 1040ez (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. 2012 income tax forms 1040ez ) If you did not hold the debt instrument the entire year, figure your OID as follows. 2012 income tax forms 1040ez Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. 2012 income tax forms 1040ez (See Accrual period under Constant yield method, later. 2012 income tax forms 1040ez ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. 2012 income tax forms 1040ez Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. 2012 income tax forms 1040ez Add the results of (2) and (3). 2012 income tax forms 1040ez This is the OID to include in income for that year, unless you paid an acquisition premium. 2012 income tax forms 1040ez (The reduction for acquisition premium is discussed later. 2012 income tax forms 1040ez ) Tax-exempt bond. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. 2012 income tax forms 1040ez In general, use the rules that follow to determine your OID. 2012 income tax forms 1040ez Constant yield method. 2012 income tax forms 1040ez   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. 2012 income tax forms 1040ez (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. 2012 income tax forms 1040ez ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. 2012 income tax forms 1040ez   Figure the OID allocable to any accrual period as follows. 2012 income tax forms 1040ez Multiply the adjusted issue price at the beginning of the accrual period by a fraction. 2012 income tax forms 1040ez The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. 2012 income tax forms 1040ez The yield must be stated appropriately taking into account the length of the particular accrual period. 2012 income tax forms 1040ez Subtract from the result in (1) any qualified stated interest allocable to the accrual period. 2012 income tax forms 1040ez Accrual period. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. 2012 income tax forms 1040ez Any short period is included as the first accrual period. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. 2012 income tax forms 1040ez Daily OID. 2012 income tax forms 1040ez   The OID for any accrual period is allocated equally to each day in the accrual period. 2012 income tax forms 1040ez Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Figuring daily OID. 2012 income tax forms 1040ez   The daily OID for the initial accrual period is figured using the following formula. 2012 income tax forms 1040ez   (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. 2012 income tax forms 1040ez Example 5. 2012 income tax forms 1040ez On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. 2012 income tax forms 1040ez 17. 2012 income tax forms 1040ez According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. 2012 income tax forms 1040ez The yield to maturity is 12%, compounded semiannually. 2012 income tax forms 1040ez The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. 2012 income tax forms 1040ez The accrual periods are the 6-month periods ending on each of these dates. 2012 income tax forms 1040ez The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). 2012 income tax forms 1040ez The daily OID for the first accrual period is figured as follows. 2012 income tax forms 1040ez   ($86,235. 2012 income tax forms 1040ez 17 x . 2012 income tax forms 1040ez 12/2) – $5,000     181 days     = $174. 2012 income tax forms 1040ez 11020 = $. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 17 + $174. 2012 income tax forms 1040ez 11), or $86,409. 2012 income tax forms 1040ez 28. 2012 income tax forms 1040ez The number of days for the second accrual period (July 1 through December 31) is 184 days. 2012 income tax forms 1040ez The daily OID for the second accrual period is figured as follows. 2012 income tax forms 1040ez   ($86,409. 2012 income tax forms 1040ez 28 x . 2012 income tax forms 1040ez 12/2) – $5,000     184 days     = $184. 2012 income tax forms 1040ez 55681 = $1. 2012 income tax forms 1040ez 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, $174. 2012 income tax forms 1040ez 11 ($. 2012 income tax forms 1040ez 95665 × 182 days) plus $184. 2012 income tax forms 1040ez 56 ($1. 2012 income tax forms 1040ez 00303 × 184 days), or $358. 2012 income tax forms 1040ez 67. 2012 income tax forms 1040ez Add the OID to the $10,000 interest you report on your income tax return for Year 1. 2012 income tax forms 1040ez Example 6. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Also, the interest payment dates are October 31 and April 30 of each calendar year. 2012 income tax forms 1040ez The accrual periods are the 6-month periods ending on each of these dates. 2012 income tax forms 1040ez The number of days for the first accrual period (May 1 through October 31) is 184 days. 2012 income tax forms 1040ez The daily OID for the first accrual period is figured as follows. 2012 income tax forms 1040ez   ($86,235. 2012 income tax forms 1040ez 17 x . 2012 income tax forms 1040ez 12/2) – $5,000     184 days     = $174. 2012 income tax forms 1040ez 11020 = $. 2012 income tax forms 1040ez 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). 2012 income tax forms 1040ez The daily OID for the second accrual period is figured as follows. 2012 income tax forms 1040ez   ($86,409. 2012 income tax forms 1040ez 28 x . 2012 income tax forms 1040ez 12/2) – $5,000     181 days     = $184. 2012 income tax forms 1040ez 55681 = $1. 2012 income tax forms 1040ez 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. 2012 income tax forms 1040ez 31 of OID in income. 2012 income tax forms 1040ez This is $174. 2012 income tax forms 1040ez 11 ($. 2012 income tax forms 1040ez 94625 × 184 days) for the period May 1 through October 31 plus $62. 2012 income tax forms 1040ez 20 ($1. 2012 income tax forms 1040ez 01965 × 61 days) for the period November 1 through December 31. 2012 income tax forms 1040ez The OID is added to the $5,000 interest income paid on October 31 of Year 1. 2012 income tax forms 1040ez Your basis in the debt instrument is increased by the OID you include in income. 2012 income tax forms 1040ez On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. 2012 income tax forms 1040ez 48 ($86,235. 2012 income tax forms 1040ez 17 + $236. 2012 income tax forms 1040ez 31). 2012 income tax forms 1040ez Short first accrual period. 2012 income tax forms 1040ez   You may have to make adjustments if a debt instrument has a short first accrual period. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez (The remaining accrual periods begin on May 1 and November 1. 2012 income tax forms 1040ez ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. 2012 income tax forms 1040ez You may use any reasonable compounding method in determining OID for a short period. 2012 income tax forms 1040ez Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). 2012 income tax forms 1040ez Consult your tax advisor for more information about making this computation. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Reduction for acquisition premium. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez To figure the daily acquisition premium, multiply the daily OID by the following fraction. 2012 income tax forms 1040ez The numerator is the acquisition premium. 2012 income tax forms 1040ez The denominator is the total OID remaining for the debt instrument after your purchase date. 2012 income tax forms 1040ez Example 7. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez The adjusted issue price on November 1 of Year 1 is $86,409. 2012 income tax forms 1040ez 28 ($86,235. 2012 income tax forms 1040ez 17 + $174. 2012 income tax forms 1040ez 11). 2012 income tax forms 1040ez In this case, you paid an acquisition premium of $590. 2012 income tax forms 1040ez 72 ($87,000 − $86,409. 2012 income tax forms 1040ez 28). 2012 income tax forms 1040ez The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. 2012 income tax forms 1040ez 1) Daily OID on date of purchase (2nd accrual period) $1. 2012 income tax forms 1040ez 01965*  2)  Acquisition premium $590. 2012 income tax forms 1040ez 72    3)  Total OID remaining after purchase date ($13,764. 2012 income tax forms 1040ez 83 − $174. 2012 income tax forms 1040ez 11) 13,590. 2012 income tax forms 1040ez 72   4) Line 2 ÷ line 3 . 2012 income tax forms 1040ez 04346  5)  Line 1 × line 4 . 2012 income tax forms 1040ez 04432  6)  Daily OID reduced for the acquisition premium. 2012 income tax forms 1040ez Line 1 − line 5 $0. 2012 income tax forms 1040ez 97533  * As shown in Example 6. 2012 income tax forms 1040ez The total OID to include in income for Year 1 is $59. 2012 income tax forms 1040ez 50 ($. 2012 income tax forms 1040ez 97533 × 61 days). 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. 2012 income tax forms 1040ez If you hold a contingent payment bond, you must report OID as it accrues each year. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. 2012 income tax forms 1040ez Noncontingent bond method. 2012 income tax forms 1040ez    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. 2012 income tax forms 1040ez In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. 2012 income tax forms 1040ez When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. 2012 income tax forms 1040ez If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. 2012 income tax forms 1040ez If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. 2012 income tax forms 1040ez Form 1099-OID. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez For example, the amount may not be correct if the contingent payment was different from the projected amount. 2012 income tax forms 1040ez If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. 2012 income tax forms 1040ez For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. 2012 income tax forms 1040ez Figuring OID. 2012 income tax forms 1040ez   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. 2012 income tax forms 1040ez The issuer must make these available to you. 2012 income tax forms 1040ez Comparable yield. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez The comparable yield is determined as of the debt instrument's issue date. 2012 income tax forms 1040ez Projected payment schedule. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez The projected payment schedule is created by the issuer as of the debt instrument's issue date. 2012 income tax forms 1040ez It is used to determine the issuer's and holder's interest accruals and adjustments. 2012 income tax forms 1040ez Steps for figuring OID. 2012 income tax forms 1040ez   Figure the OID on a contingent payment debt instrument in two steps. 2012 income tax forms 1040ez Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. 2012 income tax forms 1040ez Use the comparable yield as the yield to maturity. 2012 income tax forms 1040ez 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). 2012 income tax forms 1040ez Do not treat any amount payable as qualified stated interest. 2012 income tax forms 1040ez Adjust the OID in (1) to account for actual contingent payments. 2012 income tax forms 1040ez If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. 2012 income tax forms 1040ez If the contingent payment is less than the projected fixed amount, you have a negative adjustment. 2012 income tax forms 1040ez Net positive adjustment. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Treat a net positive adjustment as additional OID for the tax year. 2012 income tax forms 1040ez Net negative adjustment. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez Use a net negative adjustment to offset OID on the debt instrument for the tax year. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez Basis adjustments. 2012 income tax forms 1040ez   In general, increase your basis in a contingent payment debt instrument by the OID included in income. 2012 income tax forms 1040ez Your basis, however, is not affected by any negative or positive adjustments. 2012 income tax forms 1040ez Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. 2012 income tax forms 1040ez Treatment of gain or loss on sale or exchange. 2012 income tax forms 1040ez   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. 2012 income tax forms 1040ez 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. 2012 income tax forms 1040ez If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. 2012 income tax forms 1040ez See Regulations section 1. 2012 income tax forms 1040ez 1275-4 for exceptions to these rules. 2012 income tax forms 1040ez Premium, acquisition premium, and market discount. 2012 income tax forms 1040ez   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. 2012 income tax forms 1040ez See Regulations section 1. 2012 income tax forms 1040ez 1275-4 to determine how to account for these items. 2012 income tax forms 1040ez Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. 2012 income tax forms 1040ez An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d