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Home » CalCPA Discussion Forum » Estate Planning » amortization of bond premium

amortization of bond premium Expand / Collapse
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Anonymous
Posted 3/6/2009 2:22:32 PM




When issuing compiled financial statements for a trust on an income tax basis (not submitting to court), and you want to show amortization of bond premiums, do you show the amortization as a charge against principal or against income? Do you know of any specific guidance on this?

It's probably principal because it goes along with the fact that if you sell the bond at a loss, the loss is charged to principal. Therefore, any reduction to principal due to amortization of premium should follow the loss and be charged to principal.

Under UPIA, you are not allowed amortization of premiums. However, you need to compute it to keep track of basis in the event you sell the bond before maturity.
Post #739
Posted 3/6/2009 3:44:51 PM
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If you were making journal entries on an income tax basis you would debit income and credit basis.

I don't know of anything more specific because most rules for trust accountings are tied to the UPIA as adopted by California. I don't do my accountings on an income tax basis.

Mary Kay Foss

Post #740
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