The IRS recently released Notice 2018-80, which confirms that market discount will continue to be eligible for deferral after tax reform.
Market discount occurs when a debt instrument is purchased in the secondary market at an amount less than its stated redemption price at maturity. Unless a taxpayer elects under Section 1278 to ratably accrue the market discount as income, the market discount is deferred until a realization event, such as one of these:
Market discount occurs when a debt instrument is purchased in the secondary market at an amount less than its stated redemption price at maturity. Unless a taxpayer elects under Section 1278 to ratably accrue the market discount as income, the market discount is deferred until a realization event, such as one of these:
- The sale of the debt instrument
- The receipt of a principal payment
- The satisfaction of the debt instrument by the issuer