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1099 Int - What is the difference between 1099 int Line 13…

1099 Int - What is...
1099 Int - What is the difference between 1099 int Line 13 bond Premium on Tax Exempt says 30,000 and ajustments to interrest portion which says adjustment to bond premium tax exempt $10,000?
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8/30/2017
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,161
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

When you buy a municipal bond at a premium, you are required to reduce the basis of that bond by amortizing the premium paid so that your basis reaches the face value by the first call date for that bond. Brokerage firms are now calculating that amortized premium amount for you, and it reduces the reported tax-exempt interest amount on Line 8b of your Form 1040.

https://www.irs.gov/instructions/i1099int/ar01.html#d0e327

https://ttlc.intuit.com/questions/3111511-my-1099-int-has-entries-on-lines-8-tax-exempt-int-and-line-13-bond-premium-it-appears-that-13-has-been-subtracted-from-8-is-this-because-line-13-is-taxable-income

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 9 months ago
What's the adjustment to bond premium? Is that also a reduction to tax exempt interest in addition to Line 13?

The amount on Line 13 reduces the tax exempt interest amount.

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Customer reply replied 9 months ago
Sorry that's not my question. I understand that Line 13 reduces tax exempt interest. Separate from that, the 1099 has a section for Adjustments to Interest and OID which lists an adjustment to Bond Premium - Tax Exempt for $10,000 . Does that also reduce tax exempt? What are the adjustments? Thanks

I apologize if I misunderstood your question and also that I must leave my computer now because I am on a call with the IRS on behalf of another client. I will opt out so another expert can assist you.

You do not have to respond to me.

Thank you.

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Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,714
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will attempt to assist you.

Line 13: For a tax-exempt covered security, shows the amount of premium amortization allocable to the interest payment(s). If an amount is not reported in this box for a tax-exempt covered security acquired at a premium, the payer has reported a net amount of interest in box 8 or 9, whichever is applicable. If the amount in this box is greater than the amount of interest paid on the tax-exempt covered security, the excess is a nondeductible loss. See Regulations section 1.171-2(a)(4)(ii).

My understanding of the adjustment to bond premium is that the amortized amount is not deductible in determining taxable income, and that is where the adjustment comes in. Based on your example of $30,000 and $10,000, I would say that the $10,000 is the amortized amount and is not deductible in determining taxable income. SEE BELOW:

--------------------------------------

If the bond yields tax-exempt interest, you must amortize the premium. This amortized amount is not deductible in determining taxable income. However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year.

REFERENCE SOURCE:

https://taxmap.ntis.gov/taxmap/pubs/p550-015.htm

Let me know if my explanation answers your question. If it does, I ask that you please take the extra time to scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. Thank you in advance.

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Customer reply replied 9 months ago
Thank you. ***** 8 tax exempt interest is 50,000; Line 13 bond premium is 30, 000 and the right side of the 1099 says adjustments to bond premium 10,000 - then net tax exempt interest is 20,000 but what do I do with the 10,000?

Hello again.

Q: but what do I do with the 10,000?

A:

"Subtract the bond premium amortization from your interest income from these bonds.

Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. Under your last entry on line 1, put a subtotal of all interest listed on line 1. Below this subtotal, print “ABP Adjustment,” and the total interest you received. Subtract this amount from the subtotal, and enter the result on line 2" (IRS, 2014).

Therefore, the APB Adjustment is the difference between your total interest income less what you are amortizing.

REFERENCE SOURCE:

https://ttlc.intuit.com/questions/2810770-bond-premium-amortization-tax-exempt-bonds

The above explanation should answer your question. If it does, again, a positive rating is appreciated. As two experts have responded to you, when you positively rate the response (selecting 3 or more stars), please be sure that you are rating the correct expert. Thank you in advance.

Tax.appeal.168
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Thank you very much for the 5-star rating. I do appreciate it. In the future, feel free to request me personally if you have other tax or finance related questions. Have a good evening.

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