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Tax Planning/Reporting US savings bond interest on decedent's final return

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Question
My father died in 2013 while my mother died a few years ago. They owned 8 EE savings bonds that they bought in their names, registered as “Tom or Jane.” I have completed a first-pass of my father's final income tax return and there is an advantage to reporting some of the accrued interest from these EE bonds on this return (compared to reporting this interest on my return in the year that the bonds mature or I cash them in). I would like to report the interest on only 2 bonds rather than all of them or none of them. Can I report the interest from just 2 bonds on my father's final return?

Answer
Under the cash basis method, none of the increase in value of bonds (interest) is reportable until the earlier of the year the bonds are cashed in or disposed of or the year in which they mature.  Using the specific identification method, a cash basis taxpayer (most are) MAY elect to treat the annual increase in value of series EE bonds as income in each year. (See Code Section 454; Reg 1.454-1(a))

So, yes, you can report on whichever bonds you decide on, but keep careful records!

I hope this helps.

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OWEN S. ARNOFF, EA

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.

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I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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National Association of Tax Professionals

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http://www.amazon.com/Owen-Arnoff/e/B00BLRIZNU/ref=ntt_dp_epwbk_2

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Enrolled Agent, Admitted to Practice Before the IRS, Accredited Tax Preparer, Fellow of National Tax Practice Institute, Certified QuickBooks ProAdvisor (1999-2011), Sleeter Group Certified QuickBooks Consultant, Life & Disability Insurance Agent License (California, Texas, Maine), Real Estate Agent License (California); Many years of continuing education in all these fields.

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