I am far from an expert here, very far....... But TurboTax specifically converts these from the 1099-B to treat them just like interest for federal returns. It does this based upon Box 1f or the 1099-B. The Tax Guidance in TurboTax for box 1f States:
Usually, if accrued market discount is reported on your Form 1099-B, you should enter it here and we'll include this amount as accrued interest on your Schedule B.
Still looking for a way to make my PA State return not include this interest as income. I think I have to get it somehow into my PA-40 Schedule A Line 8 "Other Reduction Adjustments" but I have not figured out how to do that.
