If the bond has face value $ 1100 five years from now and is sold by the issuer for $ 1000 today, then it is not a coupon bond in the usual sense of the word (and it does not have a 10 % coupon) but rather it is a zero - coupon or original
issue discount bond.
Zeros are issued at a discount and mature at par value, and the amount of the spread is divided equally among the number of years to maturity and taxed as interest, just as any other original
issue discount bond.
Not exact matches
In these cases, the difference between the
bond's
issue price (the
discounted rate) and its face value would be considered tax - exempt income rather than capital gains.
Buying a
bond at market
discount is different than buying a bond at Original Issue Discoun
discount is different than buying a
bond at Original
Issue DiscountDiscount (OID).
These securities are known as Original
Issue Discount (OID)
bonds, since the difference between the
discounted price at issuance and the face value at maturity represents the total interest paid in one lump sum.
So while these «fallen angel»
bonds have the potential to be intrinsically higher quality than debt originally
issued at the junk or high - yield level, undue structural selling pressure from the downgrade can cause them to sell at a
discount.
Zero - coupon Zero - coupon corporate
bonds are
issued at a
discount from face value (par), with the full value, including imputed interest, paid at maturity.
the difference between the stated redemption price at maturity (if greater than one year) and the
issue price of a fixed income security attributable to the selected tax year; NOTE: Tax reporting of OID obligations is complex; if acquisition or bond premium is paid during the purchase, or if the obligation is a stripped bond or stripped coupon, the investor must compute the proper amount of OID; refer to IRS Publication 1212, List of Original Issue Discount Instruments, to calculate the correc
issue price of a fixed income security attributable to the selected tax year; NOTE: Tax reporting of OID obligations is complex; if acquisition or
bond premium is paid during the purchase, or if the obligation is a stripped
bond or stripped coupon, the investor must compute the proper amount of OID; refer to IRS Publication 1212, List of Original
Issue Discount Instruments, to calculate the correc
Issue Discount Instruments, to calculate the correct OID
The move could potentially allow Neiman Marcus to
issue new debt to buy back its
bonds at a
discount, helping slash its debt pile.
Investors» warm reception for this week's $ 3.5 bln
issue looks strange given the island's junk rating and rocky finances, not to mention that existing
bonds trade at a big
discount.
One thing to note is that there may be a long term capital gains tax on the profits you make from your zero coupon municipal
bond depending on what price you bought it compared the the original
issue discount price.
You may also come across zero - coupon
bonds which pay no interest but which are
issued at a
discount to the value on maturity, creating a capital gain.
For example, if a $ 5,000 tax - exempt
bond (
issued at par on January 1, 2003) with a 20 - year maturity were purchased five years after its issuance (on January 1, 2008) at a price of $ 4,400, the market
discount would be $ 600.
Flower
bonds: U.S. government securities that were
issued at a
discount from par value, but are acceptable at par in payment of estate taxes.
Zero coupon
bonds are
issued at a
discount to par value.
If a tax - exempt
bond is originally
issued at a price less than par (as distinguished from a subsequent sale of a previously -
issued bond), the difference between the
issue price of such
bond and the amount payable at the maturity of the
bond is considered «original
issue discount» (OID).
In addition, Internal Revenue Service Publications 550, «Investment Income and Expenses,» and 1212, «List of Original
Issue Discount Instruments,» may provide useful information for investors who buy, hold or sell market discoun
Discount Instruments,» may provide useful information for investors who buy, hold or sell market
discountdiscount bonds.
In order to determine the constant yield to maturity on a
bond, it is necessary to determine a constant
discount rate that must be applied to each and every payment on the
bond (principal and interest) in order to produce an aggregate value (as of the
issue date) that is equal to the
issue price of the
bond.
Market
discount exists when a
bond falls in value after it has been
issued.
How would market
discount be calculated in the case of a tax - exempt
bond that was originally
issued at a
discount?
Dated date Day orders Dealer Debentures Debit balance Debit spread Declared date Defeasance Defensive
issue Defined benefit plan Defined contribution plan Deflation Delivery versus payment Demand note De minimus transactions Depository Trust Company (DTC) Depository trust receipt Depreciation Derivative security Depression Designated order Designated reporting member Developmental drilling Diagonal spread Dilution Direct Participation Program
Discount Discount rate Discretionary account Discretionary income Discretionary orders Discretionary power Disintermediation Disproportionate sharing agreement District executive representative Diversification Diversified investment management company Dividend Dividend Re-Investment Plan (DRIP) Dollar
bond Dollar - cost averaging Don't know procedures DOT System Double - exempt
bonds Dow Jones Composite Average Dow Jones Industrial Average Due bill Due - bill check Due - diligence meeting DVP
Amortizable
bond premium can also result if a holder purchases a
bond that was originally
issued at a
discount and the purchase price exceeds the
issue price of the
bond plus any accrued OID on the
bond.
the
bond is
issued at a
discount and is later purchased in the secondary market at a price that is less than the original
issue price plus accrued original
issue discount through the date of purchase.
Series EE savings
bonds are different in that they are
issued at a deep
discount from face value and pay no annual interest because it accumulates within the
bond itself, and the interest is paid out when the
bond matures.
The Treasury notes have maturity dates of 10 years or less, and like Treasury
bonds, can be
issued at a
discount, at a premium, or at par.
Depending on the length of time until maturity, zero - coupon
bonds can be
issued at very large
discounts to par, sometimes 20 % or more.
A
discount bond is a
bond that is
issued for less than its par (or face) value, or a
bond currently trading for less than its par value in the secondary market.
When
bonds make their debut at
issue or when they enter the secondary market they can be purchased through full - service, online or
discount brokers, and investment and commercial banks.
Some short - term
bonds, such as the U.S. Treasury bill, are always
issued at a
discount, and pay par amount at maturity rather than paying coupons.
No attempt was made to address Original
Issue Discount (OID)
bonds which also have tax advantages regarding price appreciation.
An original
issue discount (OID) is the
discount from par value at the time a
bond or other debt instrument is
issued; it is the difference between the stated redemption price at maturity and the actual
issue price.
No - coupon agency
bond notes or «discos»: no - coupon
discount notes are
issued by agencies to meet short - term financing needs and are
issued at a
discount to par value.
He was able to offer a wrap account for a percentage of my holdings and he said that they could offer some products (
bonds, new
issues, flow thoughs) for the same cost as the online broker but, overall his advice was that I still needed the online
discount broker account.
The Original
Issue Discount (OID) form is used to show the
bond interest on a
bond when
issued at a price lower than its maturity value.
IRS regulations require cost basis adjustments for
bonds bought at a premium or
discount, as well as original
issue discount (OID) debt.
This type of
bond (also called an «accrual
bond») doesn't make coupon payments but is
issued at a steep
discount.
Instead, governments, government agencies and companies
issue bonds with zero - coupon rates at a
discount to their par value.
A similar type of
bond, known as an «original -
issue discount»
bond, is
issued below par value and may pay out some interest.
The federal tax treatment of zero - coupon and original -
issue -
discount bonds is quite complicated, so if you plan to invest in them, first consult your tax advisor.
The AFR is useful for tax concepts such as Original
Issue Discount (when issuers sell low - interest or no - interest
bonds or loans at less than face value, attempting to recharacterize interest income as return of principal), various grantor trusts (e.g. GRATs), and so forth.
You're required to report a portion of that OID (original
issue discount) each year you own the
bond.
Zero Coupon Municipal
Bond OID Accretion Calculator: Calculate the annual Original
Issue Discount accretion for up to 25 zero coupon municipal
bonds at once.