Accrued market discount

[p4lee]

I bought US treasury bonds in the secondary market.   My1099B shows the accrued market discount as a long term capital gain.  Just want to confirm that this income is taxed as long term gain rather than interest income?  And it is NOT exempt from state/local taxes?

[rjs]

Accrued market discount is taxed as interest. There will be an adjustment on your tax return to subtract the accrued market discount amount from the capital gain. When you enter the sale in TurboTax, check the box that says "I have other boxes on my 1099-B to enter." Then enter the accrued market discount in box 1f. TurboTax will report it correctly on your tax return.

The official IRS Form 1099-B does not show the amount of gain. It shows the cost, proceeds, and adjustments. TurboTax calculates the gain. If the statement from your broker shows the amount of gain, it has probably already subtracted the accrued market discount.