...
Internal Revenue Code Section 1276 dictates the acceptable methods of recognizing amortization income on dispositions of fixed income securities purchased at a discount. For USTAX purposes, securities purchased at a discount (other than OIDOriginal Issue Discount) typically require that the amortization stream be calculated using I.R.C. Sections 1272(a) (3) and 1272(a) (6) but the actual recognition of the income is deferred until disposition. Special rules dictate how the amortization should be recognized for principal repayments.
All calculations are performed at the lot level (For example, no market discount from one lot shall be applied to another when calculating the amount of amortization to recognize). The election for Accelerated Market Discount apply applies only to Identified Lot (IDLOT) cost accounting.