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taxmap/pubs/p1212-000.htm#en_us_publink1000206266
Publication 1212

 
Guide to 
Original 
Issue 
Discount (OID) 
Instruments

rule

What's New(p1)


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Sections I-A through III-G available online.(p1)

The original issue discount tables, Sections I-A through III-G, are now only available on the IRS website at http://www.irs.gov/formspubs/article/0,,id=213465,00.html. The tables are posted to the website in late November or early December of each year.

Photographs of Missing Children(p1)


The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

taxmap/pubs/p1212-000.htm#TXMP6aa7feefIntroduction

This publication has two purposes. Its primary purpose is to help brokers and other middlemen identify publicly offered original issue discount (OID) debt instruments they may hold as nominees for the true owners, so they can file Forms 1099-OID or Forms 1099-INT as required. The other purpose of the publication is to help owners of publicly offered OID debt instruments determine how much OID to report on their income tax returns.
The list of publicly offered OID debt instruments (OID list) is on the IRS website (see What's New on page 1). The information on this list comes from the issuers of the debt instruments and from financial publications and is updated annually. (However, see Debt Instruments Not on the OID List, later.)
Brokers and other middlemen can rely on this list to determine, for information reporting purposes, whether a debt instrument was issued at a discount and the OID to be reported on information returns. However, because the information in the list has generally not been verified by the IRS as correct, the following tax matters are subject to change upon examination by the IRS.
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Instructions for issuers of OID debt instruments.(p2)

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In general, issuers of publicly offered OID debt instruments must, within 30 days after the issue date, report information about the instruments to the IRS on Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. See the form instructions for more information.
Due date
Issuers should report errors in and omissions from the list in writing at the following address:

 
IRS OID Publication Project 
SE:W:CAR:MP:T  
1111 Constitution Ave. NW, IR-6526 
Washington, D.C. 20224


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REMIC and CDO information reporting requirements.(p2)

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Brokers and other middlemen must follow special information reporting requirements for real estate mortgage investment conduits (REMIC) regular, and collateralized debt obligations (CDO) interests. The rules are explained in Publication 938, Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)).
Holders of interests in REMICs and CDOs should see chapter 1 of Publication 550 for information on REMICs and CDOs.
taxmap/pubs/p1212-000.htm#en_us_publink1000206275

Comments and suggestions.(p2)

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We welcome your comments about this publication and your suggestions for future editions.
You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line.
You can write to us at the following address:

IRS Tax Forms and Publications 
SE:W:CAR:MP:T:B 
1111 Constitution Ave. NW, IR-6526 
Washington, D.C. 20224


We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

taxmap/pubs/p1212-000.htm#TXMP2af08cbc

Useful items

You may want to see:


Publication
 515 Withholding of Tax on Nonresident Aliens and Foreign Entities
 550 Investment Income and Expenses
 938 Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)).
Form (and Instructions)
 1096: Annual Summary and Transmittal of U.S. Information Returns
 1099-B: Proceeds From Broker and Barter Exchange Transactions
 1099-INT: Interest Income
 1099-OID: Original Issue Discount
 Schedule B (Form 1040): Interest and Ordinary Dividends
 Schedule D (Form 1040): Capital Gains and Losses
 W-8: Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY
See How To Get Tax Help near the end of the text for information about getting publications and forms.
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Definitions(p2)

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The following terms are used throughout this publication. "Original issue discount" is defined first. The other terms are listed alphabetically.
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Original issue discount (OID).(p2)

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OID is a form of interest. 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). Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID.
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Accrual period.(p2)

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An accrual period is an interval of time used to measure OID. The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued.
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Acquisition premium.(p2)

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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. A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. See Premium, later.
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Adjusted issue price.(p2)

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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. In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. 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.
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Debt instrument.(p2)

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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). It generally does not include an annuity contract.
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Issue price.(p2)

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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.
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Market discount.(p2)

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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. 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. The market discount is the difference between the issue price plus accrued OID and your adjusted basis.
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Premium.(p2)

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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. The premium is the excess of the adjusted basis over the payable amounts. See Publication 550 for information on the tax treatment of bond premium.
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Qualified stated interest.(p2)

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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.
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Stated redemption price at maturity.(p2)

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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.
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Yield to maturity (YTM).(p2)

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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. The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. If you do not have this information, consult your broker, tax advisor, or the issuer.