HOW TO REPORT US TREASURIES BOUGHT AT DISCOUNT

[Greta]

Vanguard reports the market discount on Sch D proceeds page. Code is D. But I don't know where to "double click" to code it as such. It's showing up as a gain on Sch D, and I don't know how to get rid of it.

Does that mean the 1099-B page provided by Vanguard already includes this phantom gain?

[Greta]

Sorry! I just found where to enter the Adjustment amount, on the left side of the form. Sch D no longer shows a profit. I assume the interest income on 1099-int as reported by Vanguard is all I need.

[Greta]

I continue to be confused. Does Sch B now add the Market Discount or not?

[sjrcpa]

Look at it and see.

[Just-Lisa-Now-]

If you double click on the stock sale Quick Entry Table line the secondary window that open have a place for that.

You have to be in the 1099B worksheet Entry Table, not in the Covered Summary boxes up top.

[Greta]

Thank you yet again, Lisa!! I found the spots you highlighted!

1) Since client has a large carry over loss on Sch D, any way to count the capital gain (32K) against the loss?

2) If it must be counted as Us Treasury income on Sch B, why does Virginia not subtract it from taxable income as it does for US Treasury interest income?

[Just-Lisa-Now-]

I guess Im confused as to what you're seeing on the 1099B statement, is it just a rogue line on it somewhere that shows this? 

Ive only seen the Accrued Market Discount on a 1099B on the Stock Sales line, like a Wash Sale adjustment.

[Greta]

I see that it cannot be reported as a capital gain because of the D code.

But how do I get Virginia to count it as UST interest, hence not taxable?

[Greta]

Yes, the stock sale line has a D code similar to a W code for wash sale. So I have used your instructions, and the "gain" now shows up on Sch B as interest income, zero on capital gain.

Virginia puzzles me why they don't deduct this additional UST interest.

[Just-Lisa-Now-]

You probably need to make an adjustment over on the state return.

Does VA have an income adjustments form/page?

[Greta · Accepted solution]

I used code 99 (other deductions) on Virginia's adjustment page. I hope this works.

Thank you for ALL you sage advice!