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Are You a Tax Terminology Expert?

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Questions and Answers

What is de minimis OID?

The amount of money a bondholder receives at maturity.

The difference between the face value of a debt instrument and the amount actually paid for it when it is issued (correct)

The total amount of interest earned on a debt instrument.

The amount of interest that is not subject to taxation.

How is the de minimis amount for OID calculated?

By dividing the stated redemption price at maturity by the number of complete years to maturity.

By multiplying the face value of a debt instrument by the number of complete years to maturity.

By multiplying the stated redemption price at maturity by the number of complete years to maturity. (correct)

By dividing the face value of a debt instrument by the amount that is actually paid for it when it is issued

What happens if the OID on a debt instrument is less than the de minimis amount?

The debt instrument is not subject to taxation. (correct)

The issuer of the debt instrument must accrue interest on the OID

The holder of the debt instrument must report income from the OID

The debt instrument is subject to higher taxes.

What is the de minimis amount for a bond with a stated redemption price of $500 and a maturity of 5 years?

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"Test Your Knowledge of De Minimis OID: Are You Up to Date on Tax Terminology?" - This quiz will challenge your understanding of de minimis OID, its definition, and its implications for taxation. Put your knowledge to the test and see if you're a tax terminology expert!