This means that cost basis for trades in physical certificates, foreign currency debt, foreign debt, convertible bonds, stripped bonds
, payment-in-kind bonds, bonds with more than one rate and some private issues will now be reported to the IRS.
A taxpayer who stripped bonds and then sold the bonds and retained the detached coupon properly allocated his entire basis to the stripped bonds and was not required, for purposes of determining loss, to allocate basis between the coupons he detached and retained and the stripped bonds he sold (as is required for transactions occurring after July 1, 1982).
0025) of the amount so payable multiplied by the full number of years from the date the stripped bond or coupon was purchased to final maturity.
are artificially "manufactured" zero-coupon bonds (see Chapter 7).
91-46 indicated that amounts received under a mortgage-servicing contract were interest payments for stripped bonds
if (1) the amounts exceeded reasonable compensation for services and (2) the mortgages were sold at the time the mortgage-servicing contract was entered into.
Some types of discounted debt instruments include corporate bonds, municipal bonds, certificates of deposit, stripped bonds
, and collateralized debt obligations.
Complex bonds mainly include physical certificates, foreign debt, stripped bonds
, convertible bonds and bonds with more than one interest rate.
Taxpayers who use the cash receipts and disbursement method of accounting and maintain a brokerage account that includes original issue discount debt instruments and stripped bonds
must include in gross income for the taxable year the amount of accrued discount allocable to the portion of the taxable year in which they held the debt instrument.
If it fails the coupon requirement, it must meet certain "specified portion" requirements that generally relate to stripped bonds
1286 for stripped bonds
should be used as a starting point.
This de minimis rule does not specifically apply to stripped bonds
and stripped coupons that have OID because of Sec.
1286 treats the holder of a stripped bond
(or coupon) as if the holder purchased a newly issued debt instrument with OID.