Bond Premium with Straight-Line Amortization

Header Clouds

bond premium amortization schedule

A contract made on a commodity exchange, calling for the sale or purchase of a fixed amount of a commodity at a future date for a fixed price. TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, report it to them at Go to for information on how to make a payment using any of the following options. This tool lets your tax professional submit an authorization request to access your individual taxpayer IRS online account.

Because the gold had been held for 1 year or less before the offsetting short position was entered into, the holding period for the gold begins on April 1, 2022, the date the straddle ended. Gain recognized on the sale of the gold will be treated as short-term capital gain. The holding Law Firm Bookkeeping and Accounting: A Completed Guide 2022 period of the stock does not include any period during which you are the writer of the option. Do not treat these substitute payments as dividends or interest. Instead, report the substitute payments shown on Form 1099-MISC as “Other income” on Schedule 1 (Form 1040), line 8z.

Effective Interest Method of Amortization FAQs

If property is transferred to you from your spouse (or former spouse, if the transfer is incident to your divorce), your basis is the same as your spouse’s or former spouse’s adjusted basis just before the transfer. The marked-to-market rules, described earlier, do not apply to hedging transactions. A transaction is a hedging transaction if both of the following conditions are met.

bond premium amortization schedule

You can deduct in each year only the interest for that year. If you use the cash method of accounting, you must pay the interest before you can deduct it. If, in Example 2, you repay $500 on November 1, the entire repayment is applied against the amount allocated to personal purposes. The debt balance is now allocated as $8,000 for investment purposes and $1,500 for personal purposes. Until the next reallocation is necessary, 84% ($8,000 ÷ $9,500) of the debt and the interest expense is allocated to investment.

What is bond amortization?

The bank where you redeem the bond gives you a Form 1099-INT showing interest income of $500. You also receive a Form 1099-INT showing taxable interest income of $300 from your savings account. If you received a Form 1099-INT for U.S. savings bond interest, the form may show interest you do not have to report. See Form 1099-INT for U.S. savings bond interest, earlier.

This section discusses two provisions of the law that may apply to gain from the sale or trade of qualified small business stock. You may qualify for a tax-free rollover of all or part of the gain. If you make the election, you must recognize gain on the sale only to the extent the proceeds from the sale exceed the cost of the qualified replacement property.

A Bond’s Par Value

In general, your broker will use the rules in Regulations section 1.1272‐2(b)(4) to determine the amortization of acquisition premium. However, you may use a constant yield method to amortize acquisition premium if you make an election under Regulations section 1.1272‐3. Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235.00 on November 1 of Year 1. The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. The debt instrument provides for semiannual payments of interest at 10% (0.10).

bond premium amortization schedule

Let’s now consider how to use the effective interest method for both the discount and premium cases. For example, under this method, each period’s dollar interest expense is the same. However, as the carrying value of the bond increases or decreases, the actual percentage interest rate correspondingly decreases or increases.

White Section

Privacy Policy

We regard your privacy as important and any personal information you give to us will be used in accordance with the Data Protection Act and the General Data Protection Regulations.

We do not store personal information about individuals who visit this site except where they provide contact information via our contact us page and contact forms available on various pages throughout the website.

Any information you provide will only be used for the reasons specified and it will not be shared with any third party without your consent, unless required by law.

Your contact details are kept securely and are only accessed by authorised members of staff as part of the provision of school services. If you do not wish us to keep this contact information please tell us.

This website uses Google Analytics which provides statistical data about the usage of the site. This information is not used to identify individuals, but is collected to provide us with an understanding of the areas of interest on our site and how our site is being used.

If you are connected to the internet you will have an IP Address. This may take the form of a figure, such as 333.333.22.1. The address will be automatically collected and logged as part of the connection of your computer to our web server and may be used to determine the total number of visits to each part of the site. This data is not collected and used for other purposes.

This website contains links to other websites. The School is not responsible for the privacy practices of other sites or organisations and recommends you consult the privacy information on those sites.

This policy will be reviewed and updated versions will be posted on the website.

If you have any questions about the use of your personal information, the Information Commissioner is the independent regulator for both Data Protection and Freedom of Information.