US treasury Accrued Market Discount

Forum|Forum|2 years ago
March 29, 2024
1 reply
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I purchased US Treasury Notes/Bonds in the Secondary Market. There were sold with an accrued market discount because current interest rates are above par. In my 1099B, the accrued market discount was classified as short and long term gains.

After automatically downloading the 1099B from my brokerage, it adjusted this short/long term capital gain and entered the gain as an Interest income on my Schedule B. Is this correct?

Shouldn't a long term Accrued Market Discount be taxed as a long term capital gain instead on interest income, as listed on 1099B?

Mike9241

if properly reported accrued market discount adds to your tax basis in the Treasury security. thus the increase is reported as interest income.

p4leeAuthor

OK thanks. So even if it’s a long term capital gain, the accrued market discount is taxed as interest income? And it is NOT exempt from state/local taxes?

ron6612

I purchase a .25% treasury serial note from fidelity website and held it to maturity. Fidelity has treated it as accrued market discount and a short term capital gain on the download rather than as interest income which would be exempt from state income taxes. Would it be okay to change the Fidelity download to turbo tax from capital gain to interest income?