1099-B

[L.S.]

Client purchased double-tax exempt bonds on 10/3/88 for $1,000. In 2007 the bonds matured and he received 1099-B showing sales price of $3,487. How do I show this? I don't think it should show up on a Sch D. I know the IRS is going to be looking for the sales price on the tax return - where do I show this?

thank you.

[BulldogTom]

I think you have to run it through the 1099 Int worksheet for the $2,487 in interest. On the 1099 INT worksheet, use box 8 and the information at the bottom of the worksheet for box 8 to make it tax free to both Fed and State.

I don't think you need to report the return of capital, but I don't think it would hurt to include the "sale" on schedule D with a purchase and sale price = 1,000.

Good question. I don't know for sure if this is the right answer. My best guess.

Tom

Lodi, CA

[taxtrio]

Client purchased double-tax exempt bonds on 10/3/88 for $1,000. In 2007 the bonds matured and he received 1099-B showing sales price of $3,487. How do I show this? I don't think it should show up on a Sch D. I know the IRS is going to be looking for the sales price on the tax return - where do I show this?

thank you.

Was the difference really interest?

But you do need to do a Sch D and show the amount from the 1099B sale "gross proceeds" and then compute the basis. If the difference (2487) is interest, you would think there would be a 1099-INT for that separately.

Are you sure the bond didn't sell for more than it was bot for? If so it would be a cap gain. LT>

I think the 1099B should have been for 1,000. then you would have a sch D 1,000 in and 1,000 out.

no gain.

But if that is the interest, and you put it on sch B, then your basis on sch d would be the 1,000 + 2487.00 taxable interest. still zeroes out. 3487 in 3487 out.

I would call the broker.

[BulldogTom]

I thought about that to, but look at his post, it says the bonds "matured". That sounds like he reached the final day and the issuer gave him his capital and interest at that time. This is how I read the meaning. That is why I go with the 1099 Int

Otherwise, you are right that he bought a bond for 1000, recieved non taxable interest over the years, and then sold it for a premium that would be taxable gain. This is not how I read the original post.

Still not sure we have the right answer, but I am hoping L.S. will post more info.

Tom

Lodi, CA

[L.S.]

Matured.

[Jill Kubiak]

Matured.

Hi,

Any chance it was a bond that had OID. That would have been taxed each year as shown on the 1099 for those years. If so then there would be an increase in basis by the amount of OID previously taxed.

Jill

[Don in Upstate NY]

Matured

Sort of funny that a bond would be bought for $1,000 and "mature" for $3,487. That isn't the way it usually works for bonds sold with significant OID. The face value (value at maturity) is generally a nice round number (like $1,000 or $10,000) while the purchase price reflects the discount and is like $234.57.

[BulldogTom]

Sort of funny that a bond would be bought for $1,000 and "mature" for $3,487. That isn't the way it usually works for bonds sold with significant OID. The face value (value at maturity) is generally a nice round number (like $1,000 or $10,000) while the purchase price reflects the discount and is like $234.57.

Don't those muni bonds pay as they go? I thought you got the interest on a quarterly or at least annual basis. For the interest to accrue and pay at maturity is different to me. Perhaps some of you have seen these?

Tom

Lodi, CA

[Don in Upstate NY]

Sort of funny that a bond would be bought for $1,000 and "mature" for $3,487. That isn't the way it usually works for bonds sold with significant OID. The face value (value at maturity) is generally a nice round number (like $1,000 or $10,000) while the purchase price reflects the discount and is like $234.57.

Responding to myself, I just found such an animal at HSBC Bank today. It's a "World Allocator Structured CD". Costs $10,000 (and up), and matures in seven years at a value dependent on the growth of the S&P500, the DJ Euro Stoxx 50, and the Nikkei 250. No cap on the upside, guaranteed return of 0% on the downside, and taxable at an OID rate of 3.75% in the years prior to maturity.

A guaranteed minimum return of 0% beats a lot of my equity investments.