Entering investment sales in forms mode is very complicated and error-prone. TurboTax strongly recommends using the Step-by-Step interview to enter investment sales. As you have seen, the interview is very clear and straightforward, and produces the correct results.
If you look closely at the forms that TurboTax produces when you enter the sale in Step-by-Step mode, you will see that the adjustment for accrued market discount is not entered on the Capital Asset Sales Worksheet. It has to be entered on a Capital Gain (Loss) Adjustments Worksheet for the sale. In the Capital Asset Sales Worksheet, when you click on the space for Adjustment Code(s) or Adjustment Amount, notice that a little magnifying glass icon appears on the left. Clicking on that magnifying glass will QuickZoom to an existing Capital Gain (Loss) Adjustments Worksheet if there is one, or prompt you to create one. In Part III of the Capital Gain (Loss) Adjustments Worksheet there is a specific line for accrued market discount.
Obviously it's a lot easier and more reliable to enter the sale in the Step-by-Step interview.
