Treasury Bond Maturing - Tax Consequences

[sengsational]

My grandmother bought my daughter a FICO STRIPS bond 21 years ago (CUSIP: 31771CTG0). It's issued to my wife C/F my daughter "a/minor u/laws".

Anyway, it's going to be maturing, and I wondered what the tax consequences would be. My first thought was that I've been getting a 1099-OID every year, so maybe there's not much in the way of tax consequences. But the price paid was about $1000, and now it's worth the face value of $5000. If I add up the OID's, it seems like it would be maybe $2000(?). Anyway, I don't think it would come close to $4000, which is the reason for the question.

Anyone have any experience with having a zero coupon bond mature?

 

[kaneohe]

don't know the answer but perhaps it's in here somewhere:
https://www.irs.gov/publications/p1212/ar02.html#en_US_201512_publink1000206406

Have you been reporting the OIDs in previous years? Perhaps the final
1099 will report the missing amount? Is it normal to have a final large lump?
Sounds like it's not linear?

ask at fairmark.com for other perspectives.

 

[DrRoy]

My understanding is that the 1099's cover the income and taxes due on the zero. If there were some other imputed income you would get a document for that too. When you buy a bond at a premium due to a high coupon, you do not get to write off the drop in value, which is the reverse situation.