Accrued Market Discount on treasury bond

Forum|Forum|1 year ago
February 6, 2025
3 replies
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I have a 1099-B showing a $12,000 accrued market discount for a treasury note that was redeemed in 2024. Coupon interest is on my 1099-INT of this year and of 2023, so this seems to be fine.

I entered this in Turbotax under the short-term sales category, where it is on the 1099-B.

I understand that the IRS treats this 'gain' as interest, but I am not clear how to get Turbotax handle it this way: should I check the box "I need to adjust my total tax basis"?

If so, should I then check the box D (accrued market discount) and enter "total adjustments" of $12,000 or -$12,000? If I enter -$12,000 it seems result in no extra federal tax; if I enter $12,000 it seems to result in double federal tax.

If I put $0 adjustment, it seems result in the correct federal tax, but it shows as a capital gain, not interest.

(I am in NY, so I understand I would have to correct the state section separately to avoid being taxed there)

What is the best way to enter this in Turbotax?

TurboTax Home & Biz Windows

Best answer by baldietax

You shouldn't need to do any adjustments just enter all the boxes the way the 1099-B came... but I am guessing the issue is you need to input it as "one by one" which gives you Box 1f to fill in, which is not available when you put it in as a "sales total" summary level. TT will then flip the box 1f over to your Schedule B.

baldietaxAnswer

baldietax

just to add, I see the AMD "D" code you are referring to on the sales total screen and both ways of doing seem to create an 8949 with code D, but doing it as sales summary method (with negative amount as the adjustment is to gain/loss to bring it to zero) doesn't seem to flip it Schedule B, as you've noticed. Also any adjustment made to a summary total will trigger TT to tell you to mail paper statement to the IRS.

Anyway - last year I had a note with AMD and put it in as "one by one" which worked fine, it will generate Form 8949 with the code D and adjustment of gain/loss; and didn't need to mail anything to IRS (I do this for any wash sales also).

HarrieNYAuthor

I re-entered the sales of my bonds in Turbotax one-by-one instead of by category and this indeed solved the problem. And I also got the message earlier that I needed to mail the 1099-B to the IRS, which has now disappeared.

Baldietax, thank you very much for your help; I really appreciate it.

Taxi_Nerd

Adjustment code D on Accrued market discount. re 1040 Sched B and NY State IT -201- A TurboTax Adjustment worksheet is triggered when you enter an adjustment code D and a negative value representing an Acc Mkt Disc. on a matured US Government Bonds/Notes on the 8449 based on a reported 1099-B column code 1f. You will see that it can relocate the adjustment value to your Sched B with the label "accrued marker discount" by using the lower section of the same adjustment worksheet page. However, adding the state code "NY" in the same lower section of the worksheet does not increase the US Govt Interest income Subtraction amount on IT-201 page 2. I think it has to be overridden manually with the full US Govt Interest income including the AMD adjustment. This does not invalidate the state e-filing. Make sure you can fully support the overridden amount as bona fide US Govt interest income. If you do not override you will lose the State Subtraction of the AMD. How are you adjusting your NY State Subtraction? Can anyone else chime in on howe to best process this NY State Subtraction?

89491

TT does not let me put in negative AMD value. with positive AMD value, form 8949 still does not report $0 for gain/loss code D. this is an error in TT.

baldietax

@89491 how are you inputting the AMD adjustment, is this thru a sales summary or "one by one". Use "one by one" with the details (box 1f etc) as reported on the 1099 (positive numbers) instead of adjusting sales summaries, it should generate Form 8949 fine, this will also remove the need to mail statement to the IRS with the details which happens whenever you put adjustment on sales summary (wash sales, AMD) or use them for noncovered securities. i.e. put anything with these adjustments as one by one, the balance of your 1099 can go in as simple unadjusted sales summary and it will all be consolidated on Schedule D.