Page 78 - Interest Income - Individuals Handbook

Exceptions to reporting OID as current income

The OID rules don't apply to the
following debt instruments.
The OID rules don't apply to the

 Tax-exempt obligations. following debt instruments.
(However, see Stripped tax-  Loans between individuals if all
exempt obligations under the following are true.
Stripped Bonds and Coupons in a. The loan is not made in the
chapter 1 of Pub. 550.) course of a trade or business
 U.S. savings bonds. of the lender.
 Short-term debt instruments b. The amount of the loan,
(those with a fixed maturity date plus the amount of any
of not more than 1 year from the outstanding prior loans
date of issue). between the same
individuals, is $10,000 or less.
c. Avoiding any federal tax

isn't one of the principal
purposes of the loan.
 A debt instrument purchased at
a premium.

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