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I realized that you are correct--the $13K is US T Bills, not notes, with the interest reported on 1099-INT box 3. The $50K is US Treas Notes.  The Notes were purchased on the secondary market and had accrued interest. The amount I paid for them included this accrued interest.

 

How do I handle the accrued interest in Turbo Tax? Do I make an adjustment to (reduce) the amount reported in 1099-INT box 3 by that amount? Or do I make an adjustment to (increase) the cost basis in 1099-B box 1e by that amount?

 

In the state tax (California) portion of Turbo Tax, I then need to make adjustments to remove all of this U.S. Treasury debt income. I think it will be clear how to do that when I get there but if you have any tips, please let me know.

 

Thank you!