Steam Train,
Thanks for the reply. The approach suggested by your link is exactly what I did - list it in the state return as an additional adjustment (I even referenced the specific CUSIP of the TVA bond). It certainly works from a software standpoint, but I suppose we'll see whether CA decides it should be audited. This year it's just one TVA bond, but next year it'll be income from multiple TVA, FHLB, and FFCB bonds, representing substantial interest income. I'm happy to report back to this thread if it raises problems.
