Box 3 of the 1099-INT from US Treasury shows 400.00 annual interest paid and 14,225.00 accrued interest reported for total of 14,625.00. These bonds were converted from EE bonds years ago and he cashed in the HH's in 2011. Client doesn't know whether he reported annual interest on EE bonds before conversion. I assume not since he's a cash basis taxpayer. Any thoughts? Thanks.
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Never mind
I think I figured it out. The accrued interest was from the EE's that they exchanged for the HH's years ago. The HH's paid interest each year to the taxpayers and was reported each year on the 1099-INT. The EE's accrued interest, reported in Box 3, is paid when the HH's are redeemed, which is what my clients did in 2011. Haven't had one of these in quite a while, so wasn't sure. Thanks. -
Pub. 550 gives an example, under "Savings Bond Traded." While the treatment you describe is the most likely, it's not the only possibility.Comment
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