Original Issue Discount
Response to the following problem:
On January 1, 2014, a cash basis taxpayer paid $32,870 for a 25-year, zero-coupon bond with a face value of $100,000. The annual yield to maturity is 4.5%
a. What is the OID on the bond?
b. What portion of the OID would be included in taxable interest income for 2014?
c. What portion of the OID would be included in taxable interest income for 2015?