My aunt bought a zero coupon bond in 1984, and added my name to her name as owners in 1993. The bond matured in 2008--I redeemed it through a brokerage in 2009 with written permission from my aunt. The money is in a brokerage account with my aunt and myself listed as owners. I received a 1099-B form with the total amount redeemed from the bond. Am I responsible for all of the interest earned on this bond, or is my aunt responsible since she still is an owner and originally bought the bond, or are we both responsible for the tax on the interest earned?
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When the bond was redeemed did you and your aunt have an agreement to how the proceeds would be split? The tax treatment of this situtation is for you (as the nominee) to report on your tax return (Schedule D, lines 3&10) only the portion of the proceeds that belong to you. So, for instance if you and your aunt agreed to split 50/50 you would report half on your tax return, less your basis (original cost plus interest you paid tax on in prior years) in the bond. You also must file a 1099B or 1099S that allocates the portion of the proceeds that should be allocated to your aunt with the IRS with the IRS by March 1, 2010. Be sure to include a copy of that filing with your tax return. I hope this helps...most of this information is in IRS Publication 17 for your reference.
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