I think I understand this, finally, although I've been doing this for a number of years. A couple of clarifying questions.
Federal treatment is as you describe above and the amortization of Bond Premiums -which I have- is required and done for me by bond on my Composite 1099. If it is only the premium paid in the specific tax year on bonds purchased in that year (Box 13) which matters, is there any need to entire the year's bond premium amortization (different in amount from box 13) via an adjustment? Is the IRS looking for that number?
Now, looking at the state tax situation, where all out-of-state bonds will now be taxable, shouldn't the accrued interest and purchase premium be applied to each bond individually, so that in-state and out-of-state bonds which will have different tax treatment, all reflect the true net interest earned? I seem to recall being able to do this on a bond-by-bond basis (just as the state-by-state interest is entered) on a previous (perhaps online) version of TurboTax.
In the absence of such individual treatment, are the accrued interest and the bond premium split evenly across all bonds? -or perhaps proportionally by bond interest value or by bond interest value by state?
