Just wanted to say, I'm having the exact issue you describe (but for Michigan vs. Cali.). My issue occurs with Notes vs. Bonds, but this is the same exact Accrued Market Discount issue as you referenced.
Solutions I've read elsewhere, essentially recommending creation of a fictious 1099INT with all Treasury-related fields combined into Box 3 (Interest on .. Treasury Obligations), didn't work. So Accrued Market Discount on Notes would be combined with periodic interest payments on Notes, plus purchase discounts on any Bills. Unfortunately, the Accrued Market Discount field is populated anyway from the adjustments on our broker's 1099-B (yours and mine, apparently), resulting in a doubling of that particular "Interest" component on Federal. So it didn't work.
My Plan B, unless I can find a fix for this, is to override the Treasury subtraction (one field) on my state form as you mentioned, increasing it by the amount of Accrued Market Interest, not properly deducted. It works in the sense that my numbers are then reported correctly and TT reviews complete just fine. I've posted elsewhere to see whether that override on the state return will preclude state efiling, as it supposedly would for Federal.
Plan C is just to override the field and file my state return on paper.
As you probably know, not every state preparer will run into this since some states don't allow this subtraction (I've heard Illinois, but haven't confirmed). But both California and Michigan do allow it. I'm surprise more people, given the current bond market, aren't raising the issue.
Glad you posted. Hope someone can answer. I am NOT calling TT suport...
