Bond Premium
Bond Premium means:
the amount the purchaser pays in buying a bond that exceeds the face or call value of the bond. The premium can be amortized each year by the bondholder to reflect the fact that the true interest rate is less than the coupon rate. Amortization is elective for taxable bonds and not allowed for tax-exempt bonds. Former IRC (check if this IRC provision is current here) §171.
The amount over face value that the taxpayer pay to buy a bond paying higher than current market rates. With taxable bonds, a portion of the premium can be deducted each year that the taxpayer own the securities.
Description and Definition of Bond Premium
This is the amount over the face value of a bond that you pay to purchase a bond which is paying an interest rate that is higher than the current market rate on newly issued bonds.
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