My broker sent me a Form 1099-OID, that shows that I had some OID for
2009, because I had purchased a bond late in the year.But that OID amount was never credited to my account, and I sold the bond earlier this year, and I still never received that amount. So do I need to report the OID amount on line 8 of Form 1040 (or Schedule B)? Not sure why I have to pay taxes for something I never received.
Was this a zero coupon bond? Did you pay face value, more than face value, or less than face value? Is it a muni bond?
There must have been some other reason for the OID. Buying late in the year won't trigger this.
Well, that's not quite the way it works.
Let's assume the OID amount is correct (it can be mind-numbingly complex to figure that out).
What that represents is some imputed interest from a discount on the price of the bond. You do have to report and pay tax on appropriately accrued OID. Now the good news is that the amount of OID is added to the basis of your bond, so in that sense you get credit for the OID and the taxes paid on it when you sell the bond. The basis will be the sum of what you paid for the bond plus the accrued OID over the time you held the bond. That will reduce your capital gain on the sale of the bond.
Thank you.
It is a bond that actually trades as if it were a stock. I bought it for less than face value - much less than face value because the issuer is currently in bankruptcy, and I was fairly certain the value would increase significantly due to pending lawsuits. I was not concerned at all about the interest for the bond (I'm not sure they're even paying it right now due to the bankruptcy), and after a few months it tripled in value and I sold it. So yeah, I don't really know any of the bond details, although the prospectus is here (I am not expecting you to read that):
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