Amortization and Accretion Regulations and Their Effect on Trust and Wealth Management Accounts

Financial Institutions

November 01, 2015
by Bryan Meddings

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Bryan Meddings Bryan Meddings
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In 2010, the Internal Revenue Service (IRS) issued final regulations on the reporting of sales of securities and their related cost basis.  Those regulations became effective for less complex fixed income securities acquired on or after January 1, 2014, that impact amortization and accretion requirements for broker dealers.  These requirements vary depending on the type of bond, the issue date of the bond, and the date the bond was purchased.
Prior to January 1, 2014, a taxpayer was required to amortize tax-exempt bonds and report original issue discount (OID) annually.  The taxpayer was required to make an election to amortize taxable bonds. Market discount was reported at the time of disposition unless the taxpayer elected to recognize annually.

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