This IRS explanation is the closest I can find in the supplied link:
"U.S. savings bonds acquired from decedent.
If series EE or series I U.S. savings bonds, owned by a cash method taxpayer who reported the interest each year, or by an accrual method taxpayer, are transferred because of death, the increase in value of the bonds (interest earned) in the year of death up to the date of death must be reported on the decedent's final return. The transferee (estate or beneficiary) reports on its return only the interest earned after the date of death."
As the decedent's final return was submitted before the ibonds were "found", this seems to insinuate that his final return would need to be amended and the two beneficiaries would need to pay for the tax consequence. Note that the total interest amount when cashed out reported on the 1099 INT has no indication of interest before and after death.
Is this and acceptable method by the IRS?
