Question: It seems that the only way to avoid the money made on the US Treasury Strip from being counted twice is to not fill out the 1099-B. Is that correct?
- No, the 1099-OID is reporting the discount you received when the bond was purchased. When you purchase a bond or note at a discount, you'll get Form 1099-OID (Original Issue Discount). The discount is taxable interest over the life of the bond, which gets reported every year you hold the bond, even if you don't actually receive any interest.
- 1099-B is received when the bond is redeemed and the OID that has been reported as income over the holding period time frame is the cost basis for this capital gain transaction. This transaction is both federal and state taxable.
- 1099-INT is the interest earned on the US Treasury bond and is taxable on your federal return, not on the state return.
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