Hector wrote: ↑Mon Jan 13, 2020 3:48 pm

Following is from the "How To Figure Amortization" from Publication 550. Do you see anything wrong with it?

Well here is how I would do it (differently).

For purpose of calculating the basis path, don't include the accrued interest paid in the basis. Don't include the coupons either. Just relax the face value plus premium down to par over the period to maturity at a constant rate.

So: calculate the notional internal rate of return for this declining-value asset using XIRR(), with a payment of 1017.34375 on 1/13/2020 and a return of 1000.00 on 2/15/2025.

This gives me a return rate of -0.336862% per year.

Then I find the value of the asset at the several Dec 31sts from 2020 to 2024, and finally the maturity date, using the Power() function using the fractional number of years (seems to work better when even the leap years are denominated as 365 days) in the interval as the exponent. That gives me 1014.03,1010.61,1007.21,1003.83,1000.43 for the EOY values of the wasting asset, and finally 1000.00. So the amounts for amortization adjustment are (3.31),(3.42),(3.40),(3.39),(3.39),(0.43). Up to rounding error that sums to (17.34).

So for 2020 "reporting" I'll list as separate adjustments the accrued interest paid and the fractional-year 2020 amortization, against the coupon interest. Subsequently, just the amortizations.

Of course neither of these will do anything for me on a treasury in an HSA in CA because I won't even be reporting interest income federally and although the account isn't exempt in CA, the interest is. So the record and the method are mainly of use if I sell the treasury note before maturity, in which case for that year I will amortize only the fraction of a year up to the sale settlement.

Sorry I didn't put this into easy to read code block.