Original Issue Discount Bond (redirected from OID bond)

Original Issue Discount Bond

A municipal bond which is issued at a dollar price below par value and for which gains realized upon the receipt of the full par value at maturity are protected from capital gains taxes under U.S. federal law. Also referred to as an "OID bond".

Notes:

Municipal bonds offer significant tax advantages as compared to other debt instruments. Federal law considers the gains incurred from the difference between the original issue price and the par value to be interest payments exempt from taxes however, any coupon payments received by the bondholder are taxable.

See also: Capital Gain, Coupon, Maturity, Municipal Bond, Original Issue Discount - OID, Par Value, Zero-Coupon Bond