United States

RSM’s Guide to Bond Premium and Market Discount

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Holders of bonds and other debt instruments (Bonds) may be subject to the bond premium and market discount rules. These rules affect the characterization of Bond holders’ income as capital or ordinary, and also affect the timing of certain interest income for U.S. federal income tax purposes. These rules generally affect the amount of gain or loss and ordinary income recognized upon sale or disposition of a Bond as well.

In our Guide to Bond Premium and Market Discount, we address the following key questions:

  • Elections available for accounting for bond premium and market discount
  • Determining whether elections are advantageous
  • How to account for bond premium and market discount with or without elections in place
  • What elections brokers must assume their customers have made when filing Forms 1099

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