Resources for calculating Imputed Interest:
Imputed Interest Calculation – Calculating Imputed or Unstated Interest Under I.R.C. 1274
Investment Income and Expenses IRS Publicaton 550
Applicable imputed income amount.
1. Figure the amount of interest that would have accrued on your net investment in the conversion transaction for the period
ending on the earlier of:
a. The date you dispose of the position,
b. The date the transaction stops being a conversion transaction.
To figure this amount, use an interest rate equal to 120% of the “applicable rate,”
2. Subtract from (1) the amount treated as ordinary income from any earlier disposition
or other termination of a position held as part of the same conversion transaction.
If the term of the conversion transaction is indefinite, the applicable rate is the federal short-term rate in effect under
section 6621(b) of the Internal Revenue Code during the period of the conversion transaction,
In all other cases, the applicable rate is the “applicable federal rate” determined as if the
conversion transaction were a debt instrument and compounded semi-annually.
Schedule B (Form 1040) Interest and Ordinary Dividends – IRS Publication 1212 – Original Issue Discount (OID) Instruments