@George4Tacks Consider this scenario.  I have investment interest expense but can't deduct it, because I have no investment income.  So I go buy something with OID, that yes I have to report but no, it doesn't increase my tax because I have the offsetting deduction.  If I keep adding the OID to the basis of the security that "pays" it, does that get me anything that I don't get if I just carry over the unused interest expense?  Doesn't it depend on all the facts and circumstances?  And, of course, we know next to nothing of those here.