Taxable bond premium

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  • appelman
    Senior Member
    • Jan 2010
    • 1195
    #1

    Taxable bond premium

    As I understand it, if taxable bond premium is not amortized, it becomes a capital loss on redemption, whereas the amortized premium offsets ordinary income. If so, amortization allows capital loss to be converted to ordinary loss. Also, my understanding is that the irrevocable election to amortize can only be made on a timely filed return, not an amended return. Am I correct on these points?
    Evan Appelman, EA
    Tags: amortization, taxable bond premium
    • Roberts
      Senior Member
      • Sep 2005
      • 807
      #2
      On an individual bond you are wrong. The premium isn't a capital loss.
      On a packaged UIT that invests in individual bonds - you would be correct.

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        • appelman
          Senior Member
          • Jan 2010
          • 1195
          #3
          Can you support that?

          If the unamortized premium is added to basis, it will presumably be recovered as capital loss when the bond is redeemed.
          Evan Appelman, EA

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