### Author Topic: OID question  (Read 14352 times)

#### AmCap

• Full Member
• Posts: 248
##### Re: OID question
« Reply #15 on: January 18, 2013, 10:20:52 AM »
That could be true, though I would be careful on using interest in the sense of what you get paid monthly and OID interchangeably. OID is just a tax fiction and is totally independent (though not necessarily different) from the interest paid out in a monthly accrual period.

#### yojoakak

• Hero Member
• Posts: 763
##### Re: OID question
« Reply #16 on: January 18, 2013, 01:26:33 PM »
That could be true, though I would be careful on using interest in the sense of what you get paid monthly and OID interchangeably. OID is just a tax fiction and is totally independent (though not necessarily different) from the interest paid out in a monthly accrual period.

Except in this case it appears that the OID is real and the Interest is the fiction: "It's both a particle AND a wave."

If I can ever get the math to work out I'll let you know for sure.

Hey, you're a tax guy right? Can you make any sense of this?

"...

(3) Determination of daily portions
For purposes of paragraph (1), the daily portion of the original issue discount on any debt instrument shall be determined by allocating to each day in any accrual period its ratable portion of the increase during such accrual period in the adjusted issue price of the debt instrument. For purposes of the preceding sentence, the increase in the adjusted issue price for any accrual period shall be an amount equal to the excess (if any) of—
(A) the product of—
(i) the adjusted issue price of the debt instrument at the beginning of such accrual period, and
(ii) the yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), over
(B) the sum of the amounts payable as interest on such debt instrument during such accrual period.

..."

http://www.law.cornell.edu/uscode/text/26/1272