In conclusion (I think): Tax treatment of bonds purchased on the secondary market and held to maturity, with a dollar amount in box 1f (accrued market discount).
Fidelity INCORRECTLY reports the sale as a capital gain. It should be interest.
TurboTax Deluxe INCORRECTLY reports the sale as a capital gain when using the option to enter the summary values from form 1099-B. It asks if there is any if there are values in box 1f, but when you check the box, it never asks for the amount in box 1f. The sale is incorrectly reported as a capital gain.
TurboTax Deluxe CORRECTLY reports the sale as interest when using the option to enter the sale individually. The only problem is that there will be a conflict, since Fidelity reported the sale as a capital gain to the IRS.
Entering info using the Fidelity statement and TurboTax's 1099-B summary option reduces my taxes and eliminates any conflict with Fidelity info sent to the IRS. I guess that makes my path forward pretty clear, wrong as it may be.
