Accrued Market Discount for US Treasuries on 1099-B

[notAnAspiringAccountant]

I received a 1099-B with accrued market discounts (box 1f) for a few treasuries I sold. I'm confused about a discrepancy though:

• From my own calculations, I know that I made x on US Treasuries in 2023.
• I see y in treasury interest on my 1099-INT.
• I see z total accrued market discounts for treasuries on my 1099-B.
• y+z > x

So some of the treasury income is double-counted across the 1099-B and 1099-INT, it appears.

I noticed that the cost bases for my treasuries on the 1099-B are wrong, at least if they're supposed to show what I paid for the treasuries. When I adjust the cost basis, the numbers come like I would expect.

So my question is: should I expect to have to adjust the cost basis for treasury sales reported on a 1099-B, or am I thinking about this all wrong? For context, these are all just 3-month treasury bills that I held to maturity. I think I must have bought them on the secondary market, from what I'm seeing online about what would trigger a 1099-B for treasury bills.

[CatinaT1]

As long as you have documentation that shows your cost basis, you can adjust it. You could call the issuer of the form for an explanation of how they came up with the figure.

Are your 1099-B and 1099-INT from the same issuer? 

[notAnAspiringAccountant]

I actually ended up figuring it out: the 1099-B 1f entries were for the accrued market discount on treasury notes, not bills. The notes had "accrued interest" at the time of purchase. The following gets you to the right place:

Total treasury income = (sum of 1099-B 1f entries)+(1099-INT box 3 treasury interest)-(sum of accrued interest on treasury notes)

TurboTax makes this adjustment possible in the 1099-INT flow.

The question I'm now struggling with is whether the treasury earnings on the 1099-B 1f are considered tax-free by my state. I know how to adjust things in TurboTax if so. I wrote to my state and got the most useless answer back (it was a non-answer - they just pointed me to documentation I've already read that is up for interpretation).

[CatinaT1]

What state are do you live in?

[notAnAspiringAccountant]

Massachusetts

[CatinaT1]

I was able to find this here: TIR 80-2: Income Tax Treatment of Interest and Gains on Certain Bonds