J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

4.19 Reporting Original Issue Discount on Your Return

The issuer of the bond (or your broker) will make the Original Issue Discount (OID) computation and report in Box 1 of Form 1099-OID the OID for the actual dates of your ownership during the calendar year. In most cases, the entire OID must be reported as interest income on your return. However, the amount shown in Box 1 of Form 1099-OID must be adjusted if you bought the bond at a premium or acquisition premium, the bond is indexed for inflation, the obligation is a stripped bond or stripped coupon (including zero coupon instruments backed by U.S. Treasury securities), or if you received Form 1099-OID as a nominee for someone else. Your basis in the bond is increased by the OID included in income.

If you did not receive a Form 1099-OID, contact the issuer or check IRS Publication 1212 for OID amounts.

Treasury inflation-indexed securities.

You must report as OID any increase in the inflation-adjusted principal amount of a Treasury inflation-indexed security that occurs while you held the bond during the tax year. This amount should be reported to you in Box 6 of Form 1099-OID, but this amount must be adjusted if during the year you bought the bond after original issue or sold it. The adjusted amount of OID must be computed using the coupon bond method discussed in IRS Publication 1212.

Periodic interest (non-OID) paid to you during the year on a Treasury inflation-indexed security may be reported to you either in Box 2 of Form ...