Treasury Bill Sold Prior To Maturity--how to enter in TT

[Trey]

A friend provided me with the following analysis to think through how to report my T-bills sold prior to maturity.  Hypothetical example:

--Bought a Bill at $970 which would have matured in 182 days at $1,000.

--However, sold it after 160 days for $995.

--Now, I would conduct a linear extrapolation between the purchase price and the value at maturity based on the days I owned the security. I was supposed to earn $30 over 182 days. At 160 days I earned $30 * (160 / 182) = $26.37. That would be my interest income. Also, since I sold a bill that was supposed to be worth $996.37 at $995, I had a short-term capital loss of $1.37.
--My broker reports the $25 as interest income on my 1099.  So I need to correct it to $26.37 interest and then create a separate entry to report a capital loss of $1.37.

First, does the above analysis make sense? Second, how do I actually enter all this stuff and "create a separate entry" in TurboTax to reflect the interest income and the capital loss?

[ThomasM125]

The analysis makes sense. You can enter the extra interest income when you report the Form 1099-INT, just add it to the interest income reported. For the capital loss, you can enter an investment sale in TurboTax. Go to the Investment Income section and use the Stocks, Cryptocurrency, Mutual Funds, Bond, other option. Indicate that you sold Stocks, Bonds, Mutual funds. 

Enter the sale as if it was reported on a Form 1099-B. Choose the Short-term, basis not reported to the IRS option for the sales section entry. Choose Bond for the type of investment. Enter $0 for the sales price and the loss amount as the cost.

[Trey]

@ThomasM125, thanks for your response.  I appreciate it.  If you have time, I would like to clarify:

--First, when I enter the capital gain portion as a new entry in TurboTax (as you suggest below), what would I put for description of the security?  Would I simply put U.S. Treasury Bill along with the actual CUSIP?  Also, would I create a separate, new entry for each bill sold prior to maturity, to reflect the capital gain or loss?

--Second, to make an adjustment to the interest on the 1099 INT (as you suggest below), would I just go into the 1099-INT downloaded from my broker and manually adjust the dollar amount in line 3 "Interest on U.S. Savings Bonds and Treas Obligations" to ensure it reflects the overall correct interest amount adjusted for any sales prior to maturity.  In this case, unlike in the item above, I'd be making an "overall" adjustment to reflect all Treasury Bills sold prior to maturity from that broker--whereas for the capital gains adjustments, I'd make an individual entry for each bill sold prior to maturity.  Does that track with your understanding of how to reflect this in TurboTax?

[ThomasM125 · Accepted solution]

Yes, you can call the investment sales US Treasury Bills and include the CUSIP number if entered individually. You can enter each one individually or just one summary entry. For the interest entry, it would be better to report the Forms 1099-INT as stated and then make an additional entry to report the extra interest. It will be easier for the IRS to match what you are reporting that way as they will be able to match your individual entries to what was reported to them.