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Original Issue Discount

Definition:

Original Issue Discount (OID) is the excess of the stated redemption price at maturity over the issue price. In simpler terms, it is when a debt instrument is issued for an amount that is less than its face amount.  The obligations are sold at a discount upon original issue or they carry stated interest that is payable only at maturity. OID may be subject to Chapter 3 withholding and reporting.

Reference: IRC s. 1273(a)(1), Treas. Reg.  s. 1.1273-1(c)(5), 1.1441-2(b)(3)(ii), 1.1473-1