PREMIUM
If I have a corporate bond in an IRA which is at a premium and distribue the bond for my RMD can I amortize the premium once it ‘s moved to taxable account?
Ex I own 100m xyz corp 6% due 2025 selling at 110 or 110,000. Bond pays 6,000, yr. Can I each yr amortize some of the 10,000 premium to offset the income from bond? If yes what is method of amortization?
Thanks
Permalink Submitted by Alan Spross on Tue, 2010-12-07 19:40
Chuck,
You should be able to amortize the premium by treating the bond as if you purchased it for it’s value on the date distributed from the IRA. The constant yield method applies to bonds issued after 9/27/85 per Pub 550, p 35. The result would be the same as if you held the bond all along in a taxable account and just elected to amortize the premium in the current year. If you elect to amortize, then you must do so on all your taxable bonds, so you cannot pick and choose between bonds.
Permalink Submitted by charles lore on Tue, 2010-12-07 19:44
Allan are there any limitations such as misc itemized deduction??
Permalink Submitted by Alan Spross on Tue, 2010-12-07 19:46
No. You would report the interest and subtract the bond premium on Sch B to produce a net Sch B interest amount. Sch A is not affected.
Permalink Submitted by charles lore on Tue, 2010-12-07 19:52
thanks Alan