Q:

Subject: Zero Coupon Treasury Receipt

 

I received the proceeds from an expired instrument purchased at Merrill Lynch, in November, which I reinvested in a 6-month CD with ING.  This was (is) listed in my name for the benefit of my grandson.  I never received any 1099s over the 15 years of its run, and I don’t know if I should declare this as income on my FED and State tax returns.

Any advice most gratefully received,

A:

It sounds as if you are referring to a US Treasury Bill that was purchased at a discount.  If so, you had the option of either reporting a pro-rata portion of the interest as it accrued each year, or waiting until you cash it in and report the difference between what you received and what you pad for it as interest income on your Federal Schedule B.  It would be tax free for state income tax purposes.

While there are some opportunities to avoid tax on some of the income by using it to pay for certain kinds of  education expenses, it doesn't sound like that applied to you.

You personal professional tax advisor can assist you in more detail with this.

Good luck.

Kerry 

Follow-Up:

Thank you so much for your assistance!  I spent two hours yesterday pouring over Pub. 550 and other IRS ppgs. becoming more and more confused. (My algebra is VERY rusty).

 

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/27/2006 08:06:00 PM Send this post: