D Eckerman Posted April 20, 2007 Report Share Posted April 20, 2007 client says... and you know they always know! That on "Money Matters" , they do not have to pay tax on the bonds as they were inherited. AND she says they do not have to pay tax on the interest from the bonds. Now I found they can take a 454 election and treat it as the deceased' income on his 1040... but it is still taxed. Am I wrong? (It would be the 7th time this season - ha ha ) Quote Link to comment Share on other sites More sharing options...
RitaB Posted April 20, 2007 Report Share Posted April 20, 2007 client says... and you know they always know! That on "Money Matters" , they do not have to pay tax on the bonds as they were inherited. AND she says they do not have to pay tax on the interest from the bonds. Now I found they can take a 454 election and treat it as the deceased' income on his 1040... but it is still taxed. Am I wrong? (It would be the 7th time this season - ha ha ) You are not wrong. Probably client heard the report incorrectly; just heard what they wanted to hear or something. (Imagine that!) The interest accrued through the DOD may be reported on the decendent's final return. Not sure the election number. You are way ahead of me on that. (Hope this is for 2007, or decedent has an extension for 2006.) Another thought: Possibly, the deceased paid the accrued interest every year, but I doubt it. Wouldn't hurt to check, though. Earnings after the DOD belong to the one inheriting the bonds and will be reported in the year the bonds are cashed. I went through this with a guy whose 2004 preparer told him there was no tax on the interest when he cashed his deceased father's bonds. Preparer said not to worry about it, inheritances aren't taxable. Son found out the hard way that some are! Mean letters from IRS. Really didn't trust what I was telling him at first, but I did a search online for "Inherited Savings Bonds" and found a butt load of articles that were in layman's terms. I also copied sections of Pub 559, too. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted April 20, 2007 Report Share Posted April 20, 2007 Well, in one way, the PRINCIPAL of the bonds is not taxable to them...y'know, I get really tired of people sometimes. When I inherited some bonds from my grandma, I said 'Thanks Grandma', and was happy grandma had thought of me. Quote Link to comment Share on other sites More sharing options...
RitaB Posted April 20, 2007 Report Share Posted April 20, 2007 Well, in one way, the PRINCIPAL of the bonds is not taxable to them...y'know, I get really tired of people sometimes. When I inherited some bonds from my grandma, I said 'Thanks Grandma', and was happy grandma had thought of me. Amen, Joan! You are soooo right. This guy that I dealt with moaned and groaned about it, said savings bonds are the worst investment, blah, blah, blah. Bottom line was he got $38,000 in interest income (no principal cause these were HH bonds, and the initial investment from Dad was accrued interest from EE bonds) for doing absolutely nothing. Dad was good to him. Hey, nobody had paid tax on that income, I told him. Do you really think IRS is gonna let that go? Quote Link to comment Share on other sites More sharing options...
mcb39 Posted April 20, 2007 Report Share Posted April 20, 2007 DE..the interest on the bonds is taxable. However, it is tax exempt on WI return., as I am sure you also know. Deductible from income as US Govt interest. :wub: Quote Link to comment Share on other sites More sharing options...
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