accrual of discount on bonds

  • Adjustment of the purchase price of bonds (bought at less than par value) to increase the value to par at maturity date. The adjustment is calculated either on a pro rata basis or so as to yield the effective rate of interest at which the purchase was made (scientific basis).

    Internal Revenue Service 1

1Internal Revenue Service, Internal Revenue Manual 4.42.6 Glossary, http://­www.irs.gov/­irm/­part4/­irm_04-042-006.html (last accessed Dec. 22, 2009).