Where do I enter taxable accrued treasury interest paid from Form 1099-int?

[Trout Season]

Hey everyone, it's my first year with Lacerte and I'm having a little trouble with where I'm supposed to enter the taxable accrued Treasury interest paid on form 1099-Int (part of the brokerage statement) that shows up in the section that says "the following amounts aren't reported to the IRS..." 

My understanding is that I need to reduce the amount of interest reported in box 1 of 1099-int by the "taxable interest paid" listed on Form 1099-Int. I was able to find that easily enough in Lacerte on screen 11 under the heading Adjustments to Federal Taxable Income in the second box "accrued interest" and it shows up on Schedule B reducing interest income just like it should with no adjustments to the state return. I'm happy at this point. 

Here's where the fun begins. For this example, Form 1099-Int has 17,000 in box 3 (for treasury bonds) so on the state return (SC) there's a subtraction from federal taxable income for 17,000 on page 2 of SC1040 to arrive at state taxable income which makes perfect sense to me since treasury bond interest is nontaxable to the state. I'm still happy! 

The next line on form 1099-Int in the section "the following amounts aren't reported to the IRS..." is  "taxable accrued Treasury interest paid" for 2500 (made up number). I don't see where I'm supposed to enter this on screen 11? I want this adjustment to reduce the interest on Schedule B to 14,500, but since it's treasury interest, and is nontaxable to the state, the adjustment for "taxable accrued Treasury interest paid" should be 14,500.

When i enter it into a test return with nothing but interest on treasury obligations and an adjustment for taxable accrued treasury interest paid it calculates the way I think it should (a subtraction on the SC return of 14,500), but if i add 1 dollar of regular interest, the SC subtraction for interest from federal obligations changes to 17,000 which doesn't make any sense to me at all. 

Should I enter them on two separate input sheets? Is that the way to make it work? I'm losing my mind. Any help would be greatly appreciated.

[George4Tacks · Accepted solution]

Try this - negative numbers sometimes give us what we want.

[Trout Season]

George4Tacks,

Thank you so much for the suggestion. Unfortunately, when I do that I get a SC critical diagnostic that won't let me use a negative number there. However, by breaking them out on each line (all regular interest on one line and accrued interest on that line and all treasury interest/accrued treasury interest on the other line) it fixed my problem. Thank you so much. My sanity is restored!

[dech]

Doesn't the IRS require that the accrued interest adjustment be itemized separately in Schedule B? This will net it...