Thanks, JohnW, but the problem is not with the 1099-INT, which works as you suggest for both Fed and Oregon correctly. This is the market discount which is reported on a 1099B. The Federal return correctly treats this income as taxable interest income, but the Oregon return does not deduct it (and it should do so). There is no unusual situations screen associated with the 1099B section like there is with the 1099 INT.
