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Irs Form 1040ez 2011

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Irs Form 1040ez 2011

Irs form 1040ez 2011 9. Irs form 1040ez 2011   Figuring Net Profit or Loss Table of Contents Introduction Net Operating Losses (NOLs) Not-for-Profit Activities Introduction After figuring your business income and expenses, you are ready to figure the net profit or net loss from your business. Irs form 1040ez 2011 You do this by subtracting business expenses from business income. Irs form 1040ez 2011 If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040. Irs form 1040ez 2011 If your expenses are more than your income, the difference is a net loss. Irs form 1040ez 2011 You usually can deduct it from gross income on page 1 of Form 1040. Irs form 1040ez 2011 But in some situations your loss is limited. Irs form 1040ez 2011 This chapter briefly explains two of those situations. Irs form 1040ez 2011 Other situations that may limit your loss are explained in the Instructions for Schedule C, line G and line 32. Irs form 1040ez 2011 If you have more than one business, you must figure your net profit or loss for each business on a separate Schedule C. Irs form 1040ez 2011 Net Operating Losses (NOLs) If your deductions for the year are more than your income for the year (line 41 of your Form 1040 is a negative number), you may have a net operating loss (NOL). Irs form 1040ez 2011 You can use an NOL by deducting it from your income in another year or years. Irs form 1040ez 2011 Examples of typical losses that may produce an NOL include, but are not limited to, losses incurred from the following. Irs form 1040ez 2011 Your trade or business. Irs form 1040ez 2011 Your work as an employee (unreimbursed employee business expenses). Irs form 1040ez 2011 A casualty or theft. Irs form 1040ez 2011 Moving expenses. Irs form 1040ez 2011 Rental property. Irs form 1040ez 2011 A loss from operating a business is the most common reason for an NOL. Irs form 1040ez 2011 For details about NOLs, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Irs form 1040ez 2011 It explains how to figure an NOL, when to use it, how to claim an NOL deduction, and how to figure an NOL carryover. Irs form 1040ez 2011 Not-for-Profit Activities If you do not carry on your business to make a profit, there is a limit on the deductions you can take. Irs form 1040ez 2011 You cannot use a loss from the activity to offset other income. Irs form 1040ez 2011 Activities you do as a hobby, or mainly for sport or recreation, come under this limit. Irs form 1040ez 2011 For details about not-for-profit activities, see chapter 1 in Publication 535, Business Expenses. Irs form 1040ez 2011 That chapter explains how to determine whether your activity is carried on to make a profit and how to figure the amount of loss you can deduct. Irs form 1040ez 2011 Prev  Up  Next   Home   More Online Publications
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Appeals Online Self-Help Tools

These tools are aids to help customers understand their appeal rights, what can be appealed, and what to expect in Appeals.

These tools deal with some of the most frequently encountered problems - the rejection of a request for innocent spouse relief; the denial of a request for abatement of certain delinquency penalties, and the rejection of an Offer in Compromise. They are simple interactive screens (decision trees) to provide assistance to customers who are not represented by tax professionals.

These tools are designed to help customers focus in on their area of dispute and help them determine if they will benefit from filing an appeal. 

These tools are aids to help customers prepare an appeal that is appropriate and complete.

Offer in Compromise (OIC)

If your Offer in Compromise has been rejected, then use this tool to determine if you should request an Appeals conference or hearing.

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If your request for Innocent Spouse Relief was rejected, then use this tool to determine if you should request an Appeals conference or hearing.  There are several types of relief available for Innocent Spouse but only if you meet certain qualifications.

Penalty

If your request to remove a penalty was rejected, then use this tool to help you decide if you should request an Appeals conference or hearing.

Mediation Programs

If you disagree with IRS's decision or action, this self-help tool explains our different mediation programs and aims to help you understand when to discuss mediation with the IRS person assigned to your case.

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The Irs Form 1040ez 2011

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