Explanation of the Process - IRIS 1099 (Updated 7/2/08)
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(Reply)
(a) Requirement of reporting
Every person -
(1) who makes payments of interest (as defined in subsection (b)) aggregating $10 or more to any other person during any calendar year, or
(2) who receives payments of interest (as so defined) as a nominee and who makes payments aggregating $10 or more during any calendar year to any other person with respect to the interest so received, shall make a return according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the person to whom paid.
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(B) Original issue discount
For purposes of this paragraph, the term "original issue discount" has the meaning given to such term by section 1273(a).
26 USC 1273 says:
(a) General rule
For purposes of this subpart -
(1) In general
The term "original issue discount" means the excess (if any) of -
(A) the stated redemption price at maturity, over
(B) the issue price.