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deficiency in issue. Higbee v. Commissioner, 116 T.C. 438
(2001).
According to Form PDF 5329 provided by the Bureau, “interest
received from Treasury bills is the difference between the
purchase price and the redemption amount -- not the discount
payment received when a bill is issued. Therefore, INTEREST FROM
BILLS IS TAXABLE AND REPORTABLE TO THE IRS FOR THE YEAR THE BILL
MATURES.” Accord Vance v. Commissioner, T.C. Memo. 1989-95.
Despite petitioner’s contention that the U.S. Treasury bills
in issue were purchased in 1998, evidence in the record clearly
shows that the bills were indeed purchased in 1997 and matured in
1998. We find that petitioner failed to report the interest
income on the Treasury bills as shown above. Accordingly,
respondent is sustained as to the interest on the U.S. Treasury
bills.
Under section 1272(a)(1), there shall be included in the
gross income of the holder of any debt instrument having original
issue discount issued after July 1, 1982, the sum of the daily
portions of the original issue discount for each day during the
taxable year on which he held the debt instrument. The term
“debt instrument” includes inflation-indexed debt instruments.
Sec. 1275(a); sec. 1.1275-7(a), Income Tax Regs. Section 1.1275-
7(a), Income Tax Regs., provides two methods to calculate the
original issue discount on inflation-indexed debt instruments:
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