Changing decision to amortize bond premium

Jul 19, 2008 6 Replies
M

On tax returns, I currently amortize the premium for bonds purchased at a premium.



According to IRS publication 550:



"You can change your decision to amortize bond premium only with the written approval of the IRS. To request approval, use Form 3115, Application for Change in Accounting Method."



I?m considering this change. To keep it simple, I'd change at a time when there are no amortizing taxable bonds in the portfolio.



Have any of you out there made this change, or know about somebody who has? Any advice?


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A

What is your reason for changing?

If this is not one of those automatic changes, then it can be a PITA to get approval.

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M

To simplify record-keeping.

(I know: "shoulda thought of that before starting.")

If requesting approval would attract undue notice or "rock the boat" in some unpleasant way, I would leave well enough alone and keep amortizing.

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G

What is your alternative to amortization? Why do you prefer it to amortization? I will be having to make this decision come next April. thanks.

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M

One possibility if you have Excel:

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The tricky part is determining the "effective rate." You can use Excel's "Goal Seek" to make the final "carrying amount" equal to the "face value" by changing the "effective rate."

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