Original Issue Discount
About Original Issue Discount:
Original Issue Discount (OID) is a discount from par value at the time a bond is issued. The amount by which the face value of a bond exceeds its issue price. Part of the discount on taxable bonds must be reported as taxable interest income each year that you own the securities. The most extreme version of an OID is a zero-coupon bond, which is originally sold far below par value and pays no interest until it matures. Generally, an OID must be amortized over the life of the debt obligation, which in turn increases the basis of the bond. A discount from par value at the time a bond is issued. The most extreme version of an OID is a zero-coupon bond, which is originally sold far below par value and pays no interest until it matures. Former IRC (check if this IRC provision is current here) §§1271-1275.
Description and Definition of Original Issue Discount (OID)
When a long-term debt instrument such as a bond or face amount certificate is issued at an original issue price that is lower than its stated redemption value the difference is called Original Issue Discount (OID). The OID is the difference between the principal amount and the issue price. Part of the discount on taxable bonds must be reported as taxable interest income each year that you own the securities. OID is reported on an annual basis as interest income.
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