We re-created your Case 1 scenario, and our results were consistent with your experience. While the accrued marked discount appeared on Schedule B as taxable interest, Form 8949 reflected no gain or loss for the bond; however, Form 8949 also contained Codes D and O in column 1f. Code D was relevant because the bond included an accrued market discount. Code O did not appear to be necessary given that the accrued marked discount adjustment had already been explained and there were no other adjustments that needed further explanation. We were not able to override Code O and remove it from our test return.
Code O requires that the appropriate adjustment be entered in column g, and in our test return TurboTax correctly calculated that adjustment as zero. Because the cost basis and sale proceeds were the same, and there were no adjustments in column g, the disposition of the bond resulted in neither gain nor loss.
@JMFord
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