For those in NY, this official memorandum from 1996 https://www.tax.ny.gov/pdf/memos/income/m95_4i.pdf explicitly calls out that the gain on sales of both notes and bills are indeed taxable.
What you should be seeing (based on my experience) is as follows:
- 1099-B shows Accrued Market Discount in column 1F
- Form 8949 will have an equivalent negative adjustment in column (g) on the line corresponding to the sale of your treasury, zeroing out the capital gain
- Schedule B should have a line item corresponding to the AMD, which adds it to your interest income and in turn to your overall federal taxable income
- The actual interest earned, if any (which is also included on Schedule B), will be reported separately as a subtraction from federal income on your state return
I too thought that I needed to "override" something here to make the numbers work, but it seems that TT is doing the math correctly here.
