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

Update: Effect of Sequestration on Certain State & Local Government Filers of Form 8038-CP
Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, certain automatic reductions will take place as of October 1, 2013. These required reductions include a reduction to refundable credits under section 6431 of the Internal Revenue Code applicable to certain qualified bonds.

Published Volume Cap Limit for Tribal Economic Development Bonds
IRS announces the Published Volume Cap Limit for applications for allocations of national bond volume limitation authority to issuers of tribal economic development bonds for the period beginning February 1, 2014.

Extra Time Granted for Tax-Exempt Bond Issuers Affected by Severe Storms and Tornados in Oklahoma
Government entity issuers of tax-exempt bonds affected by the severe storms and tornados occurring in parts of Oklahoma may qualify for additional time to file certain returns related to tax-exempt bonds, qualified tax credit bonds, and specified tax credit bonds.

New Voluntary Closing Agreement Program Request Form
The Internal Revenue Service released the new Form 14429, Tax Exempt Bonds Voluntary Closing Agreement Program Request, which must be submitted with a Tax Exempt Bonds Voluntary Closing Agreement Program submission request.

IRS Report on Avoiding Troubled Tax-Advantaged Bonds
This report produced by the TEB Compliance Practice Research Team seeks to provide aid to issuers of tax-advantaged municipal bonds. It identifies some considerations for issuers of such bonds and is TEB’s initial step toward producing public resource products that assist issuers in avoiding troubled transactions.

Sale of Assets Financed with Tax-Exempt Bonds by State and Local Governments and 501(c)(3) Organizations
Often, in their need to raise funds, state and local governments and 501(c)(3) organizations may sell property financed with tax-exempt bonds. These sales could cause the bond issue to become taxable. This article provides basic information concerning remedial actions needed, if necessary, to preserve the tax-exempt status of the bond issue.

TEGE ACT 11th Report
The eleventh report of recommendations of the Advisory Committee on Tax Exempt and Government Entities (ACT).

ARRA and HIRE Act Bond Guidance
Guidance on bond provisions of the ARRA and HIRE Act.

TEB Post-Issuance Compliance
Provides basic post-issuance information for issuers of tax-advantaged bonds.

TEB Voluntary Compliance
Provides information about post-issuance and voluntary compliance.

TEB Financial Restructuring Compliance
Provides information for issuers or conduit borrowers with defaulted or distressed obligations.

TEB Archives
Past articles and information on Tax Exempt Bonds topics.

Contact TEB
If you need to contact Tax Exempt Bonds this page will provide you with contact information.

TEB Published Guidance
Information and guidance for the Tax Exempt Bond Community.

TEB FAQs
Frequently Asked Questions about Tax Exempt Bond topics.

Page Last Reviewed or Updated: 26-Mar-2014

The File Back Tax

File back tax Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. File back tax Proc. File back tax 2009-37 Table of Contents SECTION 1. File back tax PURPOSE SECTION 2. File back tax BACKGROUND SECTION 3. File back tax SCOPE SECTION 4. File back tax ELECTION PROCEDURES SECTION 5. File back tax REQUIRED INFORMATION STATEMENT SECTION 6. File back tax EFFECTIVE DATE SECTION 7. File back tax TRANSITION RULE SECTION 8. File back tax PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. File back tax PURPOSE . File back tax 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. File back tax . File back tax 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. File back tax This revenue procedure describes the time and manner of providing this additional information. File back tax . File back tax 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. File back tax Taxpayers should be aware that these regulations may be retroactive. File back tax See § 7805(b)(2). File back tax This revenue procedure may be modified to provide procedures consistent with additional guidance. File back tax SECTION 2. File back tax BACKGROUND . File back tax 01 Section 108(i), Generally. File back tax Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. File back tax L. File back tax No. File back tax 111-5, 123 Stat. File back tax 338. File back tax In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. File back tax Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). File back tax The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. File back tax 1273-1(d) of the Income Tax Regulations. File back tax The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. File back tax For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). File back tax A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). File back tax See § 108(i)(5)(D). File back tax The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. File back tax Section 108(i)(5)(D)(ii). File back tax For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. File back tax . File back tax 02 Applicable Debt Instrument. File back tax Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. File back tax The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). File back tax Section 108(i)(3)(B). File back tax For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. File back tax 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. File back tax 1502-13(g)(5). File back tax . File back tax 03 Reacquisition. File back tax Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). File back tax The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. File back tax See § 108(i)(4)(B). File back tax The term “acquisition” also includes an indirect acquisition within the meaning of § 1. File back tax 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). File back tax For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. File back tax . File back tax 04 General Requirements for the Section 108(i) Election. File back tax Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. File back tax (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. File back tax ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. File back tax Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. File back tax . File back tax 05 Section 108(i) Elections Made by Pass-through Entities. File back tax In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. File back tax Section 108(i)(5)(B)(iii). File back tax . File back tax 06 Additional Information on Subsequent Years’ Returns. File back tax Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. File back tax . File back tax 07 Exclusivity. File back tax Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). File back tax . File back tax 08 Allocation of Deferred COD Income on Partnership Indebtedness. File back tax Section 4. File back tax 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. File back tax If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. File back tax 704-1(b)(2)(iii). File back tax Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). File back tax The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). File back tax The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). File back tax . File back tax 09 Partner’s Deferred § 752 Amount. File back tax A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). File back tax A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). File back tax To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. File back tax 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). File back tax See Rev. File back tax Rul. File back tax 92-97, 1992-2 C. File back tax B. File back tax 124, and Rev. File back tax Rul. File back tax 94-4, 1994-1 C. File back tax B. File back tax 195. File back tax A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). File back tax . File back tax 10 Allocation of Deferred COD Income on S Corporation Indebtedness. File back tax For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. File back tax . File back tax 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. File back tax (1) In general. File back tax The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). File back tax These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. File back tax OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). File back tax COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. File back tax See § 1. File back tax 56(g)-1(c)(1). File back tax (2) Exceptions for certain special status corporations. File back tax The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. File back tax OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. File back tax . File back tax 12 Extension of Time to Make Election. File back tax Under § 301. File back tax 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. File back tax An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. File back tax Section 301. File back tax 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. File back tax SECTION 3. File back tax SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). File back tax SECTION 4. File back tax ELECTION PROCEDURES . File back tax 01 In General. File back tax (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. File back tax 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. File back tax 07, 4. File back tax 08, 4. File back tax 09, or 4. File back tax 10 of this revenue procedure. File back tax (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. File back tax 01(1)(a) of this revenue procedure for making the § 108(i) election. File back tax The rules that apply to an automatic extension under § 301. File back tax 9100-2(a) apply to this automatic extension. File back tax . File back tax 02 Section 108(i) Elections Made by Members of Consolidated Groups. File back tax The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. File back tax See § 1. File back tax 1502-77(a). File back tax . File back tax 03 Aggregation Rule. File back tax A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. File back tax A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. File back tax 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. File back tax . File back tax 04 Partial Elections. File back tax (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. File back tax Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. File back tax The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. File back tax (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). File back tax Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. File back tax (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. File back tax Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). File back tax A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. File back tax The provisions of this section 4. File back tax 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. File back tax . File back tax 05 Contents of Election Statement. File back tax A statement meets the requirements of this section 4. File back tax 05 if the statement— (1) Label. File back tax States “Section 108(i) Election” across the top. File back tax (2) Required information. File back tax Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. File back tax 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. File back tax . File back tax 06 Supplemental information. File back tax The statement described in section 4. File back tax 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. File back tax 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. File back tax 05(2)(d) of this revenue procedure. File back tax This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. File back tax If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. File back tax If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. File back tax In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. File back tax 08, 2. File back tax 10 and, if applicable, 4. File back tax 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. File back tax . File back tax 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. File back tax The rules of this section 4. File back tax 07 apply to partnerships other than partnerships described in section 4. File back tax 10 of this revenue procedure. File back tax (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). File back tax For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. File back tax , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. File back tax Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). File back tax (2) Election information statement provided to partners. File back tax The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. File back tax 07(2). File back tax The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. File back tax A statement meets the requirements of this section 4. File back tax 07(2) if the statement— (a) Label. File back tax States “Section 108(i) Election Information Statement for Partners” across the top. File back tax (b) Required information. File back tax Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. File back tax 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. File back tax 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. File back tax 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. File back tax (c) If a partner fails to provide the written statement required by section 4. File back tax 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. File back tax 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. File back tax (3) Partner reporting requirements. File back tax The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. File back tax 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. File back tax Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. File back tax A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. File back tax If a partner provides its written statement under this section 4. File back tax 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. File back tax 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. File back tax . File back tax 08 Additional Requirements for an S Corporation Making a § 108(i) Election. File back tax (1) Information filing on Schedule K-1 (Form 1120S). File back tax For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. File back tax , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. File back tax S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. File back tax (2) Election information statement provided to shareholders. File back tax The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. File back tax 08(2). File back tax The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. File back tax A statement meets the requirements of this section 4. File back tax 08(2) if the statement— (a) Label. File back tax States “Section 108(i) Election Information Statement for Shareholders” across the top. File back tax (b) Required information. File back tax Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. File back tax 06 of this revenue procedure. File back tax . File back tax 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. File back tax The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. File back tax 964-1(c)(3). File back tax Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. File back tax 05 of this revenue procedure and, if applicable, section 4. File back tax 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. File back tax . File back tax 10 Section 108(i) Elections Made By Certain Foreign Partnerships. File back tax The rules of this section 4. File back tax 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). File back tax See § 1. File back tax 6031(a)-1(b). File back tax (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. File back tax 05 of this revenue procedure and, if applicable, section 4. File back tax 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. File back tax 6031(a)-1(b)(5) it files with the Service. File back tax In addition, a nonfiling foreign partnership must include in the information required in section 4. File back tax 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. File back tax S. File back tax persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). File back tax (2) The nonfiling foreign partnership must make the election, in accordance with § 1. File back tax 6031(a)-1(b)(5), by the date provided in section 4. File back tax 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. File back tax (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. File back tax 07(1) of this revenue procedure. File back tax Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). File back tax The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. File back tax 07(2) of this revenue procedure by the date provided in section 4. File back tax 01(1)(a) of this revenue procedure. File back tax The partnership should not attach any statement described in section 4. File back tax 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. File back tax However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. File back tax (4) The partnership and each affected partner must satisfy the requirements of section 4. File back tax 07(3) of this revenue procedure. File back tax . File back tax 11 Protective § 108(i) Election. File back tax (1) In general. File back tax A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. File back tax If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). File back tax Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. File back tax A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. File back tax 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. File back tax 01(1)(a) of this revenue procedure. File back tax The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. File back tax A statement meets the requirements of this section 4. File back tax 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. File back tax 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. File back tax 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. File back tax 06 of this revenue procedure. File back tax (2) Statements provided to shareholders and partners. File back tax (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. File back tax 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. File back tax 11(1)(d) of this revenue procedure. File back tax (b) The partnership or S corporation should not attach the statements described in this section 4. File back tax 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. File back tax . File back tax 12 Election-Year Reporting by Tiered Pass-Through Entities. File back tax (1) A partnership required to file a U. File back tax S. File back tax partnership return other than under § 1. File back tax 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. File back tax 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. File back tax 07(1)(a) through (d) of this revenue procedure). File back tax (2) If a partnership described in section 4. File back tax 12(1) of this revenue procedure receives a statement described in sections 4. File back tax 07(2) or 4. File back tax 10(3) of this revenue procedure or this section 4. File back tax 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. File back tax 07(2)(b)(x) of this revenue procedure. File back tax If an S corporation receives a statement described in sections 4. File back tax 07(2) or 4. File back tax 10(3) of this revenue procedure or this section 4. File back tax 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. File back tax 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. File back tax The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. File back tax The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. File back tax (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. File back tax 704-1(b)(2)(iii). File back tax The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. File back tax No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. File back tax The partnership allocates amounts described in section 4. File back tax 06 of this revenue procedure under this section 4. File back tax 12(3) as if the additional COD income was realized. File back tax (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. File back tax No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. File back tax (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. File back tax (6) This paragraph 4. File back tax 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. File back tax S. File back tax Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. File back tax 07(1) of this revenue procedure, or a statement described in sections 4. File back tax 07(2) or 4. File back tax 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). File back tax (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. File back tax 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. File back tax 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. File back tax (b) A Category 2 filer must include its share of the information described in section 4. File back tax 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. File back tax Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. File back tax (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. File back tax 12(6)(a)(ii) and 4. File back tax 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. File back tax However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. File back tax (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. File back tax 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. File back tax 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. File back tax 12(1) and (2) of this revenue procedure. File back tax Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. File back tax 12(6) of this revenue procedure. File back tax (8) The provisions of section 4. File back tax 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. File back tax 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. File back tax 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. File back tax 11(1)(d) of this revenue procedure. File back tax SECTION 5. File back tax REQUIRED INFORMATION STATEMENT . File back tax 01 Annual Information Statements. File back tax Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. File back tax 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. File back tax 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. File back tax . File back tax 02 Contents of Statement. File back tax A statement meets the requirements of this section 5. File back tax 02 if the statement— (1) Label. File back tax States “Section 108(i) Information Statement” across the top; (2) Required information. File back tax Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. File back tax (3) Election attached. File back tax Includes a copy of the election statement described in section 4. File back tax 05 of this revenue procedure. File back tax . File back tax 03 Additional Annual Reporting Requirements for Certain Partnerships. File back tax The rules of this section 5. File back tax 03 apply to partnerships other than partnerships described in section 5. File back tax 05 of this revenue procedure. File back tax (1) In general. File back tax A partnership that makes an election under § 108(i) (except for a protective election under section 4. File back tax 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. File back tax 01 of this revenue procedure. File back tax In addition, for each taxable year in which a statement is required under section 5. File back tax 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. File back tax 07(1) of this revenue procedure. File back tax (2) Annual information statements provided to partners. File back tax The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. File back tax 01 of this revenue procedure, a statement meeting the requirements of this section 5. File back tax 03(2). File back tax The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. File back tax A statement meets the requirements of this section 5. File back tax 03(2) if the statement— (a) Label. File back tax States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. File back tax (b) Required information. File back tax Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. File back tax If a partner fails to provide the written statement required by section 4. File back tax 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. File back tax 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. File back tax . File back tax 04 Additional Annual Reporting Requirements for an S Corporation. File back tax (1) In general. File back tax An S corporation that makes an election under § 108(i) (except for a protective election under section 4. File back tax 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. File back tax 01 of this revenue procedure. File back tax In addition, for each taxable year in which a statement is required under section 5. File back tax 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. File back tax 08(1) of this revenue procedure. File back tax (2) Annual information statements provided to shareholders. File back tax The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. File back tax 01 of this revenue procedure a statement meeting the requirements of this section 5. File back tax 04(2). File back tax The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. File back tax A statement meets the requirements of this section 5. File back tax 04(2) if the statement— (a) Label. File back tax States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. File back tax Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. File back tax . File back tax 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. File back tax (1) The rules of this section 5. File back tax 05 apply to nonfiling foreign partnerships. File back tax (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. File back tax 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. File back tax 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. File back tax 01 of this revenue procedure. File back tax (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. File back tax 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. File back tax (4) For each taxable year in which a statement is required under section 5. File back tax 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. File back tax 07(1) of this revenue procedure. File back tax Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). File back tax The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. File back tax 6031(b)-1T(b). File back tax The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. File back tax 05(2) of this revenue procedure. File back tax (5) For each taxable year for which a statement is required under section 5. File back tax 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. File back tax 03(2) of this revenue procedure. File back tax The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. File back tax . File back tax 06 Information Statements Made on Behalf of Certain Foreign Corporations. File back tax Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. File back tax 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. File back tax 01 of this revenue procedure. File back tax . File back tax 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. File back tax (1) A partnership required to file a U. File back tax S. File back tax partnership return other than under § 1. File back tax 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. File back tax 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. File back tax 07(1)(a) through (d) of this revenue procedure). File back tax (2) If a partnership described in section 5. File back tax 07(1) of this revenue procedure receives a statement described in sections 5. File back tax 03(2) or 5. File back tax 05(5) of this revenue procedure or this section 5. File back tax 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. File back tax If an S corporation receives a statement described in sections 5. File back tax 03(2) or 5. File back tax 05(5) of this revenue procedure or this section 5. File back tax 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. File back tax 03(2)(b)(i) through (viii) of this revenue procedure. File back tax The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. File back tax The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. File back tax (3) This paragraph 5. File back tax 07(3) provides the rules for persons described in section 4. File back tax 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. File back tax 03(1) of this revenue procedure, or a statement described in sections 5. File back tax 03(2) or 5. File back tax 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). File back tax (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. File back tax 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. File back tax 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. File back tax (b) A Category 2 filer must include its share of the information described in section 4. File back tax 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. File back tax Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. File back tax (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. File back tax 07(3)(a)(ii) and 5. File back tax 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. File back tax However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. File back tax (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. File back tax 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. File back tax 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. File back tax 07(1) and (2) of this revenue procedure. File back tax Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. File back tax 12(6) of this revenue procedure. File back tax SECTION 6. File back tax EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. File back tax SECTION 7. File back tax TRANSITION RULE . File back tax 01 Noncomplying Election. File back tax Except as otherwise provided in this section 7. File back tax 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. File back tax However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. File back tax . File back tax 02 Modification of Election. File back tax A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). File back tax To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. File back tax . File back tax 03 Notations. File back tax A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. File back tax A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. File back tax See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. File back tax SECTION 8. File back tax PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. File back tax S. File back tax C. File back tax 3507) under control number 1545-2147. File back tax An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. File back tax The collection of information in this revenue procedure is in sections 4, 5 and 7. File back tax This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. File back tax This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. File back tax The collection of information is required to obtain a benefit. File back tax The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. File back tax The estimated total annual reporting burden is 300,000 hours. File back tax The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. File back tax The estimated number of respondents is 50,000. File back tax Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. File back tax Generally, tax returns and return information are confidential, as required by § 6103. File back tax DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. File back tax Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). File back tax For further information regarding this revenue procedure, contact Megan A. File back tax Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. File back tax Blanchard at (202) 622-3950 for questions involving OID, Ronald M. File back tax Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). File back tax Prev  Up  Next   Home   More Internal Revenue Bulletins