Tax Help: E Bonds
This is one in a series of tax questions from readers answered by local members of the California Society of Certified Public Accountants, to help with your 1999 and 2000 tax issues.
I transferred E bonds that had matured to I bonds. Do I pay tax on the E bonds? An IRS official told my husband to write that it was a “trade” and I wouldn’t have to pay, although I received a 1099 form from the bank where I bought them. Can you help me?
For the record:
12:00 a.m. March 29, 2000 For the Record
Los Angeles Times Wednesday March 29, 2000 Home Edition Business Part C Page 3 Financial Desk 2 inches; 57 words Type of Material: Correction
Tax-free savings bond exchange--An incorrect answer was provided to a tax question that appeared Saturday in the Business section. Series E or EE savings bonds cannot be transferred to I bonds in a tax-free exchange. Series E and EE bonds can be exchanged tax-free only for Series HH bonds. Marketable securities, such as Treasury bonds, are eligible for a tax-free exchange under Internal Revenue Code 1037.
Obligations issued by the United States may be exchanged tax-free for other obligations issued by the United States, as long as no money is received in the exchange. In your case, you would report the amount per the 1099 as both sale and purchase price and note that the transaction is a tax-free exchange per Internal Revenue Code 1037. Your basis in the I bonds will carry over as cost of E bonds.
--Phyllis Dunn, CPA, Gorelick & Uslaner, Los Angeles
To find a certified public accountant, visit https://www.calcpa.org. Questions and answers will also be posted on The Times’ Web site at https://www.latimes.com/taxes.
