amortizable premium

amortizable premium
The premium paid for a bond debenture, note, certificate, or other evidence of indebtedness which bears interest and is issued by a corporation, government, or political subdivision, including both registered and unregistered bonds. IRC § 171(d). Where bonds are purchased by a trustee at a premium, the amount paid as premium 'is commonly amortized by deducting from each interest or coupon payment on the bonds equal instalments sufficient in amount in the aggregate to bring the purchase price of the bonds to par at maturity, paying only the balance of each such payment to the cestui que trust. Such amortization has been held to be a proper method of accounting for trustees in Massachusetts. Old Colony Trust Co. v Comstock, 290 Mass 377, 195 NE 389, 101 ALR 1.

Ballentine's law dictionary. . 1998.

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