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Elect to accrue savings bond interest under 454

Bob Saunders
Level 3

Anyone know where this election is found.  Want to include in income savings bond interest as it accrues.  Believe it is a section 454 election.  

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4 Comments 4
Level 15

There is no election statement for this.  You simply impute the accrued interest as income for the current year based on increase in redemption price since acquisition:

454(a) Non-Interest-Bearing Obligations Issued at a Discount

If, in the case of a taxpayer owning any non-interest-bearing obligation issued at a discount and redeemable for fixed amounts increasing at stated intervals or owning an obligation described in paragraph (2) of subsection (c), the increase in the redemption price of such obligation occurring in the taxable year does not (under the method of accounting used in computing his taxable income) constitute income to him in such year, such taxpayer may, at his election made in his return for any taxable year, treat such increase as income received in such taxable year.

Still an AllStar
Level 15

Usually an election made by a parent for a child.  Used to be a time when buying bonds for a kid was not considered abusive.  This is what Pub 550 says:

Choice to report interest each year. The
choice to report the accrued interest each year
can be made either by your child or by you for
your child. This choice is made by filing an income tax return that shows all the interest
earned to date, and by stating on the return that
your child chooses to report the interest each
year. Either you or your child should keep a
copy of this return.
Unless your child is otherwise required to
file a tax return for any year after making this
choice, your child does not have to file a return
only to report the annual accrual of U.S. savings
bond interest under this choice. However, see
Tax on unearned income of certain children,
earlier, under General Information. Neither you
nor your child can change the way you report
the interest unless you request permission from
the IRS,

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Bob Saunders
Level 3

Thanks - but not looking for advice if it is worthy of making the election.  Looking for a prewritten election in Lacerte.  Seems they have some obscure elections but not this fairly common one.  

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Bob Saunders
Level 3

Thanks - So there is no canned election in Lacerte.  From my reading, an election requires a statement, so I'll make one myself with the last choice "other election."  No harm in adding this to confirm the election is being made.