IRD - Savings Bonds

[Corduroy Frog]

Decedent leaves US Savings Bonds valued at $6500. His cost when purchased in 1970s and 1980s was $1200.

1. Is the "new" value at stepped-up basis $6500 such that the beneficiaries can cash them out with no interest to report?
2. Is the $5300 in previously unreported basis classified as "Income in Respect of a Decedent" and the cashout results in $5300 taxable income?

[New York Enrolled Agent]

There is no "step-up" for US Savings Bonds. Tax must be paid on the interest.

The executor of the estate can elect to report the accrued interest up to the date of death on the decednt's final tax return under §454(a). See Rev Ruling 68-145

[RitaB]

Yeah

Agree with NY, I gained a terrific client a few years ago because savings bond interest ($38,000) was left off his return. See Pub 559, I think, it's been a while.

Wow, it was good to come in this morning and not have ANY messages. Or people on my doorstep.