My wife's aunt owned a US Savings Bond payable to my wife upon the aunt's death). We got a 1099-INT statement from the bank. Does my wife owe taxes on this interest?

[Molar1]

The aunt was the sole owner of the bond but was payable to my wife upon the death of the aunt. My wife cashed the US Bond and got a 1099-INT from the bank. Who is responsible for the taxes on the interest since it is an inheritance?

[Cattlerancher · Accepted solution]

I did a little research at IRS.gov and TreasuryDirect.gov but could not confirm my answer.

Yes, I believe she does owe income tax on the interest. They are not held in an estate and do not qualify for the stepped up cost basis. They are POD, (payable on death). Most US Saving bonds do not pay interest until cashed and no income tax is due until that time. So cashing the bond triggered the interest payment to your wife, thus the 1099-INT.

[catfishhutchens]

my wife due to her receiving the money

[Molar1]

Even as a beneficiary?