Apparently some bonds are covered and others non-covered. However, the one 1099-B that I have ready access to at the moment is applying the same amortization method to both forms.An important question is whether the bonds are covered by IRS regulations that require brokerages to keep track and report the basis to the account holder and also to the IRS when the brokerage issues a 1099-B due to sale, maturity, or other disposition. For covered bonds, use what the brokerage reports as the basis unless you have a strong reason to doubt what the brokerage reports.
With Bond B in the opening post, it is almost certainly a covered bond and the brokerage is calculating the basis as if premium is being amortized each year. The Form 1099-INT from the brokerage each year should have reported how much of the premium had been amortized for the year. For a bond with taxable interest, the premium that was amortized for a year should have reduced the taxable interest income on the tax return for the year.
If the amortization results of non-covered bonds are not reported to the IRS, then is it legit (read: legal) to use the initial cost + fee as the cost basis or must I still use the amortization process? This is a curiosity question as once I set up amortization for one bond, I can easily set it up for all. Thanks,
3cat
Statistics: Posted by 3cat — Mon Sep 02, 2024 4:08 pm — Replies 4 — Views 155