Federal Tax

Time Value of Money: OID and Imputed Interest (Portfolio 535)

  • This Portfolio examines the tax treatment of debt-instrument issuers and holders under §1271 and reviews the original issue discount rules and Treasury regulations interpreting them.


Bloomberg Tax Portfolio, Time Value of Money: OID and Imputed Interest, No. 535, examines the tax treatment of the issuers and holders of debt instruments under Code §1271 et seq. It examines the original issue discount (OID) rules and the Treasury regulations interpreting them as well as the rules governing the tax treatment of market discount and the §7872 rules which impute interest deductions and income to the parties to certain “below market interest” loans. In addition to providing an analysis of the rules, the Portfolio contains numerous computational examples, demonstrating the application of the Code and regulations to specific debt instruments.

Bloomberg Tax Portfolios on related topics include:

  •  186 T.M., Financial Instruments: Special Rules.
  •  187 T.M., Taxation of Non-Equity Derivatives.
  •  188 T.M., Taxation of Equity Derivatives.
  •  536 T.M., Interest Expense Deductions.

This Portfolio may be cited as McCawley, 535 T.M., Time Value of Money: OID and Imputed Interest.

Table of Contents

I. Scope, Background and Organization
II. Original Issue Discount
III. Imputation of Interest
IV. Variable Rate Debt Instruments
V. Debt Instruments That Provide One or More Contingent Payments
VI. Market Discount; Bond Premium; Election Under Regs. 1.1272–3; DIs Purchased Between Payment Dates, Short–term Obligations, Etc.
VII. Below Market Loans

Harrison McCawley
Harrison McCawley
Tax Management Portfolio Author (deceased)
Silverstein and Mullens
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