Original Interest Discount (OID) occurs when a firm issues an instrument of indebtedness (bond, note) at a price below its maturity prices so that holding the investment to maturity yields an otherwise unreported increase in interest income. Further, since a note or bond can be traded - sold in the secondary market - the tax accounting calls for the value of that amount of "over-redemption" to be recognized yearly as if the holder had actually received an interest payment in that amount. This is a frequently executed marketing technique in the underwriting and sale of municipal (tax-exempt) bonds. You want to amortize this OID amount over the holding period because otherwise at maturity you will have created an erroneous appearance of taxable capital gain on the tax-free bond.
Therefore, the appropriate way in Business program to report Form 1099-OID (or frequently the OID for tax-exempt is not reported on a seperate Form 1099-OID) is make entries as if two separate Form 1099-INT were received, as Business program does not have a separate interview entry for OID.
See attached PDF
If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67
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USAR 64-67 AIS/ASA MOS 9301 - O3
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