OID reported on my 1099

[Abigail7]

What happens if I do not report the OID shown on my Brokers 1099B ?

When a bond matures I report the purchase cost and the redemption amount and show the difference as capital gain. I have always thought that the OID was included in the purchase, i.e. that it reduced my cost of buying the bond.

Am I in error?

[AmyC · Accepted solution]

1. You are required to report the OID each year over the life of the bond. Once the bond matures, you will have paid taxes on the purchase price and the OID so the basis will be the face value.

2. No, you are correct. The OID does reduce the price for purchase. An OID (Original Issue Discount) is the excess of a bond or note's stated redemption price over its issue price. The "stated redemption price" is usually the face value of the bond or note (say $10,000). The "issue price" is generally the amount at which the bond or note was first sold by the issuer (say $9,500). You will receive Form 1099-OID at the end of the year in order to report the discount of $500. This is your profit and it is taxable interest income for you over the life of the bond.

[jtax]

This can be complicated.

What did you pay for the bond? what is it's par value? what is the coupon? Is it tax exempt?

This article might be helpful.

https://s3.amazonaws.com/static.contentres.com/media/documents/990086a6-d87e-46df-bdb4-681554969ee5....

[Mike9241]

well OID can get tricky as the name says its ORIGINAL issue discount.  amortization of the difference between the original issue price (which is at a discount) and redemption value. OID reported may not be correct if you bought the security in the secondary market. since as stated it's may be figured on the original discount not yours.

see this IRS pub

https://www.irs.gov/pub/irs-pdf/p1212.pdf 

to the price you paid you add each year's OID which is supposed to be reported on Schedule B as interest income if held to maturity and the OID is correct there should be no gain or loss. if sold before maturity you could have a gain o loss.