Changing decision to amortize bond premium


M

MyVeryOwnSelf

On tax returns, I currently amortize the premium for bonds purchased at a
premium.

According to IRS publication 550:

"You can change your decision to amortize bond premium only with the
written approval of the IRS. To request approval, use Form 3115,
Application for Change in Accounting Method."

I’m considering this change. To keep it simple, I'd change at a time when
there are no amortizing taxable bonds in the portfolio.

Have any of you out there made this change, or know about somebody who has?
Any advice?
 
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A

Arthur Kamlet

On tax returns, I currently amortize the premium for bonds purchased at a
premium.

According to IRS publication 550:

"You can change your decision to amortize bond premium only with the
written approval of the IRS. To request approval, use Form 3115,
Application for Change in Accounting Method."

I’m considering this change. To keep it simple, I'd change at a time when
there are no amortizing taxable bonds in the portfolio.

Have any of you out there made this change, or know about somebody who has?
Any advice?
What is your reason for changing?

If this is not one of those automatic changes, then it can be
a PITA to get approval.
 
M

MyVeryOwnSelf

What is your reason for changing?

To simplify record-keeping.

(I know: "shoulda thought of that before starting.")

If requesting approval would attract undue notice or "rock the boat" in
some unpleasant way, I would leave well enough alone and keep amortizing.
 
G

Gil Faver

MyVeryOwnSelf said:
On tax returns, I currently amortize the premium for bonds purchased at a
premium.

According to IRS publication 550:

"You can change your decision to amortize bond premium only with the
written approval of the IRS. To request approval, use Form 3115,
Application for Change in Accounting Method."

I'm considering this change. To keep it simple, I'd change at a time when
there are no amortizing taxable bonds in the portfolio.

Have any of you out there made this change, or know about somebody who
has?
Any advice?
What is your alternative to amortization? Why do you prefer it to
amortization? I will be having to make this decision come next April.
thanks.
 
A

Arthur Kamlet

What is your alternative to amortization? Why do you prefer it to
amortization? I will be having to make this decision come next April.
thanks.

First, we are not discussing tax exempts here since there
is no such election.


The alternative to amortization is to use the purchase price
as cost when calculaing capital gains.
 
D

DF2

First, we are not discussing tax exempts here since there
is no such election.


The alternative to amortization is to use the purchase price
as cost when calculaing capital gains.
And regarding the "why", I expect it is simplicity. I see the
amortization as complex. And once I understood the calculation, it
is something that would need to be handled annually. And for many,
the savings may not be significant.

If somebody has a reference to a web page or program that simplifies
the handling, that would be nice. I remember searching for something
simple in the past, but I did not find what I was looking for. I was
looking for something more operational than theoretical. There are a
lot of mortgage amortization calculators, but I did not see one for
bonds. That would be useful in selling a muni or if the muni got
called, besides describing the method for those who might make the
election for taxable bonds.
 
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