My CPA can't understand how OID applies to this security (vs. bonds where he normally sees OID).
I was credited with OID quarterly amounts during 2012 that correspond to dividend distribution dates, but which are 56% of the dividends actually credited to my account.
When the reportable OID (which is equal to 56% of my reported dividends) is added to the Quarterly Dividends, I am responsible for taxes on a LOT more income than I actually received.
My brokerage also included a category for MVO labeled "Undetermined Term Transactions" which show quarterly distribution dates that are one week prior to dividend distribution dates (in my statements).
I examined the "MVO Oil Trust 2012 Federal Income Tax Information" booklet, and "IRS Pub 1212 Guide to OID", but I am totally confused, just like my CPA. He says he can refer me to a CPA/Tax Attorney at $500/hr and he can research the matter (Minimum $2000 retainer), but there MUST be a simpler way. If I figure what the CPA and CPA/Tax Attorney cost, I am losing any income on my MVO shares PLUS more.
I am not looking for tax consultation per se, but just where I can find a simple way to understand (for me and my CPA).
It's fully explained in the "MVO Oil Trust 2012 Federal Income Tax Information" tax booklet you refer to.
It is confusing, I agree but I would think your CPA should have no trouble with it. All I can suggest is you read it again, slowly.
Your first mistake is that MVO did not pay any dividends, so you should be declaring no dividend income. That is why you say your totals are more than you actually received.
Apart from the OID interest, the second main category for the income is return of principal (declared as proceeds on schedule D, with basis equal to proceeds, so not resulting in any tax. Then there is a small amount of admin expenses which go on schedule E, and if I remember correctly that is it.
Hard to get the concept in your head, I agree, but once you get it, the reporting is pretty trivial.
Think of it this way...when you bought units, think of it as though you made a mortgage loan to the trust.
Then every 3 months, they make a repayment to you and each of those installments consists of part interest on the loan (the OID part), and part repayment of the loan principal (schedule D proceeds). It's a funny structure used by a few of these trusts but that is essentially the way it is structured for tax purposes.
I use Turbotax (no accountant) and the first time I did one of the trusts with this structure I had to spend a few hours reading the tax booklet several times, but once I got the hang of it, each subsequent year is a breeze and takes 10 minutes to plug in the new numbers. Pat particular attention to the example with numbers.
Has your tax accountant looked at the tax booklet? I would really expect it should pose no problem for someone who does this stuff for a living, even if he hasn't encountered this structure before. If he can't handle it, maybe a change of accountants is in order. There is certainly no need for any expensive tax attorney.
Throw away your "IRS Pub 1212 Guide to OID", just read the tax booklet again, keeping in mind my analogy above
P.S. Don't rely on the brokerage 1099 being correct for trusts like this. They often have it completely wrong, although since it sounds like they reported OID on your 1099, it sounds like they may have it correct. Either way, do the calculations yourself using the tax booklet and you can verify you did it correct because OID + proceeds (sched D) - admin expenses should equal the distributions received if you did it correctly.
Remember there are no 'dividends' so that comes out.