Savings Bond Interest Page Savings Bond Interest Page Don Fitch CPA CITP (877)CPA-Help or (877)272-4357 Website www.Paylesstax.com

wwwPaylesstaxcom
Toll Free (877)CPA-Help or (877)272-4357

Don Fitch CPA's professional services include Guaranteed results with the IRS, tax returns for ALL 50 STATES, Financial and IRS Audits, Financial Reviews, Compilations, IRS Discovery's, Natural Disaster Relief, Lender Letters, and CPA Employment Verification

Savings Bond Interest
Page

Chat Live with a CPA

Free Internet Contact Form

Free Consultation

Free Tax Forms from 1980 to Present

Free Tax Chat

Free Video Messenger Chat

Actual IRS Wage Levy Releases

Actual IRS Offers in Compromise

Actual Testimonials

Actual Lien Releases

Don Fitch CPA's Guaranteed IRS Wage Levy Release Program

Haven't Filed in Years! What should I Do?

What to Look for in a CPA

Taxes and Bankruptcy

We prepare Federal and State Tax Returns for ALL 50 States!

(Individual)

(Amended)

(Partnership)

(Trust)

(Corporation)

(Sub S-Corporation)

(Estate)

(Gift Tax)

(Federal Unemployment Taxes)

(Payroll Taxes)

(Non Profit)

(Information)

Don Fitch CPA's Resume

Webmaster's Resume

Don Fitch CPA's Employment Opportunities

Directions to Don Fitch CPA

INTEREST PAID ON SAVINGS BONDS
AND OTHER UNITED STATES OBLIGATIONS

IN GENERAL

Interest on United States obligations issued on or after March 1, 1941, and obligations issued by any agency or instrumentality of the United States after that date, is fully taxable. Reg. Section 1.61-7(b)(3). A cash-basis taxpayer who owns United States savings bonds issued at a
discount, however, has an election under the provisions of Code Section 454 as to when to report the interest. See Section 9.4(b).

The interest generally is taxed to the owner of the bond. However, in the case of co-owners, it is generally taxed to the co-owner who bought the bond. Thus, if one taxpayer uses his funds to buy a bond that is owned by co-owners, that taxpayer must pay tax on the interest. This is true even
if the other co-owner redeems the bond and keeps all the proceeds.

COMPLIANCE TIP: Under these circumstances, the other co-owner will receive a Form 1099-INT at the time of redemption. The other co-owner is a nominee, and must provide the co-owner who is taxed with another
Form 1099-INT showing the amount of interest from the bond that is taxable.

If co-owners each contribute part of the bond's purchase price, the interest is generally taxable to the co-owners in proportion to the amount each paid. For spouses in community states that hold bonds as community property, rather than as separate property, one-half of the interest is
considered received by each, and each generally must report one-half the interest. However, community property exempt from federal tax generally (e.g., municipal bond interest) keeps its exempt status for both spouses. IRS Publication 555, Community Property. Community property is discussed
in Ch. 757.

Generally, interest earned from United States government obligations is exempt from state, but not federal, income taxation. The Ninth Circuit has held, however, that with respect to the Territory of Guam, interest on bonds of the United States is subject to the territorial income tax
because the Guam tax was enacted by the United States Congress rather than the local authority. Gumataotao v. Director of Department of Revenue and Taxation, No. 99-15997 (9th Cir. Jan. 1, 2001).