Do we owe federal tax on the cost basis of a US Treasury Bond bought in 1987, if we sold it in 2018?

[jockopatrick]

We have continued paying interest each year.

[Carl]

No. You already paid taxes on the cost basis back in 1987 when you purchased it. You will owe taxes on the gain however. The gain is reported as interest income and I would fully expect the bank where you cashed it to issue you a 1099-INT showing the reportable gain you will have to pay taxes on.

[Critter-3]

Short lesson  in bonds ... usually they are purchased at less than face value and you pay taxes on the interest each year which increases your basis so if you hold it to full maturity the sale would be a wash.  Ask your broker to explain what and how much would be taxable if you disposed of the bond today. 

[mellish7777]

Can't make heads or tails of this because there's a difference in buying and selling savings bonds, treasury bills and treasury bonds and a difference whether the bills-bonds are bought on the primary or secondary market. Your broker will know the details as Critter3 said. I think Carl is assuming you bought a savings bond and are cashing it in at a bank but savings bonds are not the same as treasury bonds.

[Critter-3]

IF the bonds are in a broker's account and you "sell/redeem" them  then ask the broker to explain it to you.

IF  you take the bonds to the bank to be cashed in  then ask the banker to explain.