Tom <Tom[at]cppc.com> wrote:

- quote -

You're right. Scratch my statement above.

I pulled out 1099's from a couple different years and looked
at them more closely ... and you're right. They include all the
interest received in the box 1 total, but not any of the interest paid.

Reading Pub 550 this has a subtlety I did not previously recognize.
If you buy a bond between interest dates, and pay the seller
an amount for accrued interest, this amount is not immediately
considered negative interest income. Instead it is -- temporarily --
part of your basis in the bond. Then, when you receive the next
coupon payment (which could be in the following taxable year),
the amount of interest income recognized is the coupon minus
the previously paid accrued amount, and the latter is subtracted
from your basis.

Slightly wacky, but I suppose it's done that way to account
for the purchase date being in a different tax year than the
subsequent coupon.

Steve

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"Steve Pope" <spope33[at]speedymail.org> wrote in message
news:gnkm6l$c7j$1[at]blue.rahul.net...
- quote -

understanding is that they do include the accrued interest given when sold,
but not that paid when purchased. They show that as a separate listing and
leave it up to you to deal with.
I suppose (assuming for the moment that I am right) you have to deal with
the accrued interest paid in the year you buy it, but the accrued interest
given waits until you sell it; so they can't do it all for you.

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"Steve Pope" <spope33[at]speedymail.org> wrote in message
news:gnkm6l$c7j$1[at]blue.rahul.net...
- quote -

from what I can tell, my brokers' 1099s include all interest received in the
boxes, including accrued interest. It is up to me to back it out with a
negative number, as Tom is attempting to do.

don't know anything about tax programs, I do it by hand using back of
envelopes for calculations . . .

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Tom <Tom[at]cppc.com> wrote:

- quote -

My question is (and I don't know if the answer to this is
the same for all brokers): is there any reason not
to believe the values in box 1, 3, and 8 don't already include
accrued interest paid or received when bonds are bought or sold?

Looking at my 1099 from the broker I do bond transactions
with, it is clear they included these amounts. They
conveniently break this out in a section called "Detail
Information of Interest Income". So from my perspective,
I just use the amount in the box and I'm done. (Except
possible on Schedule D.)

Steve

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

I did read the publication 550; it was to just put the accrued interest as a
negative number under the entry for interest.

Well, that doesn't work for me on TaxCut.

The 1099INT is:
Line 1 Interest Income 275
Line 3 Interest/Treasry 1886
Line 8 Tax-Exempt Int 4490

The Accrued interest paid is:
Corporate Bonds 14
Treasury Bonds 290
Municipal Bond 502

I entered the 1099INT and then a second 1099INT with negative numbers for
all the accrued interests; which is what I read PUB550 as requiring. Well
TaxCut gives me errors saying it can't accept negative interest.
TaxCut does allow you to enter adjustments for purchases made between
interest payments, but you can only enter a single number for Accrued
interest Adjustment; when I have three different kinds of interest to adjust
for.
So I entered 806 in accrued interest and it puts a smaller figure in accrued
interest on Schedule B; apparently it divides up the accrued interest over
the total interest and puts the taxable share on Schedule B.

Is this acceptable? It is only approximately correct, as the accrued
interest isn't necessarily in the same proportion as the interest.
If not, then what the heck do I do?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >