As tax time draws near, a reminder on dealiing with Original Issue Discount. This is imputed interest you don't receive, but have to pay tax on anyway. It occurs with zero coupon bonds, inflation-adjusted Treasuries, etc.
If you receive a 1099-OID form, you have OID.
Paying the tax is automatic. But you should increase the basis of the security by the amount of OID so you don't pay capital gains on the same amount when you sell it.
I handle this by entering two transactions into Quicken:
Interest income from the security for the OID amount. Return of capital from the security for MINUS the OID amount.
This results in no net cash change in the account, but increases the basis by the OID amount.
- Walt Bilofsky