Hi itonewbie,

Thank you for answering. I think you are right. For my education purposes, I would like to understand, is it correct then, that the OID is still need to be entered as accrued interest--earned interest, even when  the value of the treasury was lower than the cost? I was told by the client that they have suffered mark to market losses (but haven't sold the instrument), and I am reading on "Publication 1212 (01/2022), Guide to Original Issue Discount (OID) Instruments" that you don't enter those as interest in the event of market discount? Here is the excerpt made me think that: 

"Market discount.

An OID debt instrument generally has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument’s issue price plus the total OID that accrued before you acquired it. In general, a debt instrument is purchased in the secondary market at a market discount when the value of the debt instrument has decreased since the instrument’s issue date (for example, because of an increase in interest rates). An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. The market discount is the difference between the issue price plus accrued OID and your adjusted basis."