ACCORDING TO TREASURYDIRECT.GOV:
You have a choice. You can
1- report the interest every year
2- put off (defer) reporting the interest until you file a federal income tax return for the year in which the FIRST of these events occurs:
you redeem (cash in) the bond and receive what the bond is worth, including the interest, or
you give up ownership of the bond and the bond is reissued, or
the bonds stops earning interest because it has reached final maturity
...so on above question, this means interest should've been reported for tax year 2016 at maturity (which is the earlier of the 2 events), NOT when they were redeemed later.
