If you weren't the rightful owner of the bonds, then you don't have to pay tax on the interest income. You would have to report the bond interest as you normally would on your tax return, then enter a negative adjustment to income to cancel it out, along with an explanation and then mail your tax return in.
You enter the negative adjustment by using the following menu tabs in TurboTax:
- Federal
- Income and expenses
- Less common income
- Miscellaneous income
- Other reportable income
Enter a description of the entry (mis-assigned income?) and enter the amount as a negative number
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