I bought 12 secondary market bonds that materialized in 2023. It seems that for all of them I made some money off of accrued market discount (ex. buying for 29,700 and getting back 30,000 so $300 gain for example) and other money from interest (for example $100). I bought both Federal Treasuries and Municipal Bonds (NO corporate bonds). It seems that my 1099-B form only lists 5 of the bonds (1 municipal bond and then 4 Treasury Notes) and not the other 7. None of my Treasury BONDS are listed on the 1099-B, only my Treasury NOTES. As I look through it seems that all 5 of the bonds on the 1099-B had some form of Accrued Interested (ex. the bond was between interest payments so there was $25 in accrued interest up to that point which I paid to the Bond seller and then got back when the bond materialized --- using the ex above I actually paid 29,725 and in the end at maturity got 30,000 bond + the 25 accrued interest + 100 interest due = 31,250 Total). It seems that my other 7 bonds were reported in my 1099-INT and NOT on the 1099-R and that those bonds were very similar except for the fact there did not seem to be Accrued Interest paid for them. I have 3 questions:
1. So I assume the 1099-R only reports bonds with accrued interest? Since all my Treasury NOTES are on the 1099-R and none of my Treasury BONDS are, then I assume there is some difference between the two such that the way interest is paid for Treasury BONDS is done so in a manner such that Interest does not accrue or the accrued interest does not get included in the secondary market bond payment?
2. Based on the way things were input into Turbotax, the money made off of accrued market discount (ex. buying for 29,700 and getting back 30,000 so $300 gain) which is shown on the 1099-R for 5 of my bonds showed up on the tax forms as taxable income. Since Treasury Notes are not taxed at the state/local level I assumed that the interest ALONG WITH THE GAINS FROM THE ACCRUED MARKET DISCOUNT would be state/local tax exempt. Am I incorrect about this? Is it only the gains on interest that are state/local tax exempt here in New York? Also as mentioned above there were 5 of the bonds that showed up on the 1099-B and 1 was municipal so should everything associated with this secondary market municipal bond purchase be fully tax exempt or should the gain from the accrued market discount of this bond still be taxed (because it shows up on the 1099-R form and on TurboTax seems to be input as taxable profit which I did not think was the case as I thought the accrued market discount gains from municipals was still tax exempt?).
3. All of these bonds were bought for a quick turn-around and owned by myself for less than 1 year. If I were to buy secondary market bond that did not materialize for >1 year would I be able to treat all of my gains as Capital Gains taxes? I am in 35% Federal Income tax bracket so being able to only have to pay 20% Capital Gains taxes would make a big difference.
