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Get your taxes done using TurboTax
Unless the original owner has previously reported as income some of the interest payable prior to time of death, you will be liable for taxation on the entire amount of accumulated interest.
To further explain, the bonds value is a combination of the original purchase price plus the accumulated and to-date foregone interest. The owner has the option to year-by-year report the interest accumulated but most people wait until either maturity or when they liquidate the bond, at which time the total accumulated interest is liable to taxation.
An exception to your liability may exist if the Personal Representative of the Decedent did have the Estate declare the accumulated interest as income and pay from the Estate the tax obligation - it is unlikely, however.
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USAR 64-67 AIS/ASA MOS 9301 - O3
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